The posts at WeAreThe99Percent are sobering, shocking.
They are some of people caught in the downward spiral of the US economy, but in reality it’s been happening for years as the split between the wealthy and the ‘middle class’ gets increasingly large.
The stories are of cripplingly high health care costs that destroy families, of foreclosures on mortgages and of the obvious result of years of banks pushing debt to customers.
There are also strong themes of ever-increasingly expensive education that is of diminishing value in the job market, and people are loaded up with tens of thousands in debt and low paid or no jobs.
These are signs of a society that is failing its people, and a strong articulation of exactly what the Occupy Wall Street movement is all about.
Is this the real Tea Party?
David Koch, second richest man in New York is apparently a cornerstone funder of the Tea Party, and he and his brother hold strong Libertarian views. Some of those views I regard as part of a fair society (legalisation of prostitution and drugs, gay marriage, removal of farm subsidies) but some are downright dangerous (removal of Social Security, the Federal Reserve Board and welfare).
The Tea Party movement was arguably taken over and certainly accelerated by Fox News into what seems to be a nutty right wing group, but the mass membership are driven by much of the same concerns as Occupy Wall St.
We are faced with interesting times over the next weeks – will the Tea Party followers increasingly realise that they have been duped?
This newer Occupy Wall Street movement appears to be a genuine one, rising from a sea of frustration from people who are under-served and with little prospect. It started from a suggestion in a email from Adbusters to their readers, and seems to have no leaders.
Many of the participants made mistakes, perhaps taking on too much debt or studying the wrong degrees. But many more of them have done what society demanded of them, attending university, paying insurance, buying a car – and then got clobbered. The safety net in the USA has many holes, and doesn’t last for long.
The problems are not so simple
A lot of what the financial industry (Wall Street) does is good, even the slicing and dicing of mortgages up into CDOs was a good idea. What was not good was the pricing of those CDOs, the way they were sold and the way that mortgages were granted to people who realistically had no hope of ever paying them off. What is worse is the propensity to clip the ticket for increasing amounts. The short term dealmaking, get the money now nature of the street has its place as lubricant for helping businesses make tough decisions, but it encourages unacceptable banking practices in the long run. The US really does need to reinstitute the separation of retail banks and investment/trading banks, and bring in adult supervision.
The financial institutions do not stand alone in being recipients of fury. US corporations there are paying an increasingly small share of the overall tax burden, with some such as GE earning billions and paying little or no tax, or even receiving rebates. This is the result from years of corporate lobbying for tweaks in tax law, and the results are repugnant. The USA could learn from New Zealand should dramatically simplify their tax code, much like Roger Douglas did in 1984, and introduce a GST.
That’s not to say that that everyone on Wall Street is repugnant, or that even they see themselves doing wrong – far from it. It’s a game where the choices are laid out in front of you, and if you excel then the money will come. It’s a game where the amount of money flying around is so high that it’s relatively easy to ensure that a little sticks to those making the transaction.
Financiers however play within rules set for them by legislators in Washington DC. Those legislators are there thanks to a host of donations from thousands of people, but some of the larger amounts come from companies and individuals on Wall Street. That mixture of politics and money has lifted the concerns of corporations and diminished the relative concerns of individuals. It’s got to stop, but a recent Supreme Court decision actually went the other way – defending the right of corporations to get involved in elections.
A decent society is decent to everyone, regardless of whether they are old, young, sick, or healthy, or even whether they chose at times not to abide by our rules. I reject completely the idea of living in a society that accepts homelessness, that does not care for mentally and that locks up people for offenses that are relatively harmless. We humans are better than that.
Being part of the 1 percent
I was lucky enough to study and work at two elite USA institutions – Yale University and McKinsey & Co. The experiences at those two places were outstanding – the level of education at top schools and the scale of the work available in the USA at the top end far exceeds anything here. I helped, for example, 2 organisations with over $500 billion in assets at the highest level. I was taught by people that wrote the books we study from and met a group of ultra smart, globally savvy, fun and driven people. In short I was becoming part of the 1 percent, even though for four of my five years in the USA I was in debt, and even though my income paled in comparison with those on Wall street.
I deliberately chose not to apply for Wall Street jobs during my MBA, as despite the fun of playing with large sums of money there seemed to be little reward beyond chasing the money god. I was lucky (or unlucky) enough to temp for a few months in a bank that sold structured financial products in London, counting the amount of money that the bankers had made over and above the internally calculated value of those products. It was a calculation of a knowledge advantage, and the units were millions of dollar per day. Those bankers or traders were seen as the elite within the bank people, but in reality they were arseholes, and like everyone else there, including me, they were dedicated to making money and to little else. I was lucky because I managed to get kicked out relatively quickly.
Being part of the 1 percent as a professional isn’t easy either. You are expected to work incredibly hard, maintain a certain sense of decorum and not rock the boat. It helps to have gone to the right school, for undergraduate and graduate studies, if not before. You don’t get much in the way of holidays, and are expected to be on call at all times.
I managed, courtesy of the last recession, to again break away from the USA corporate scene.
New Zealand
Meanwhile in New Zealand many are experiencing at some of the negative impact of the GFC, though I am unsure as to how bad it really is. Compound that with the hammering that Christchurch took, and while we are just getting on with it, we potentially have some real problems.
However we are blessed with a society and politics that, ACT party notwithstanding, generally and genuinely finds it unacceptable to treat people so harshly.
We are seeing increasing disparity between the wealthy and the rest in NZ, and we therefore need to doubly continue to ensure that the social welfare safety net is working. That means free or cheap education and health, as fundamental rights, it means a living income for everyone regardless of their circumstance and it means making sure we don’t have a situation where housing is unaffordable and can create catastrophic losses for families.
At the same time we need a society and economy where businesses can start, nurture, grow and prosper. We already have some good elements in our tax system, but there is a way to go before we get a fair tax system that rewards entrepreneurialism and has minimal loopholes. We don’t, for example, tax capital gains at all here. A simple across the board 20% tax on capital gains worked well in the USA for many years, and a tax I would welcome here, excluding only primary residences.
While there are problems, we have a good society here, and many live the life that many of the 1 percenters do not manage to live in the USA. We have the lifestyle many in the world dream of, while we have the ideal economy to start and grow businesses.
So what can we do about it here in NZ?
There is not a lot we can do about US policy, and it is senseless to get buried in US politics as it is something which we can and should not try to influence. Also it is, as far as I know, illegal for non-citizens to donate to campaigns.
But we can make sure that we don’t follow in the footsteps of the US by making sure we stay vigilant on the things that make our society great. We missed for example, decent regulation of finance companies, resulting in the loss of billions. We succeeded though in standing up to banks, and their current strength is partially a function of that.
Why can’t we make our 1% into 100%? Why not aim to make New Zealanders the envy of the world, combining a (minimum) decent living with a vibrant economy and the world’s best lifestyle.
It’s something worth pushing for, and here are some of the basic elements I believe we need to (continue to) push for*:
- A simple social welfare system that ensures everyone gets a living wage, regardless of the reason they need help
- Low or no income taxes for those earning under a minimum amount
- Free or near free high and consistent quality education for those who cannot afford otherwise
- Free or near free health care for those who cannot afford otherwise
- A flat capital gains tax (say 20%) on all capital gains except for sale of the primary residence
- Decriminalization of all and legalization of certain drugs, to drive safer drug taking though better messaging, less drug taking (Portugal example), higher income from tax on drug sales and removal of the largest cause of crime from the mandate of police.
- Constant effort to maintain our short election campaigns and campaign financing that cannot be influenced by wealth of individuals or corporations.
- Constant effort to increasingly simplify tax law, making it as easy for corporates to understand their income liability as it it is with GST.
- Firm and fair regulation from well educated and informed regulators of companies that take money from investors.
- Continued celebration of individuals who make it big by building great companies with strong values, and condemnation of those who create wealth through financial trickery and do not give back.
There is more. However for now my main question is just how bad is it in New Zealand? Are we seeing the desperation of the US, or are our limited resources being largely applied where it matters? We will always have perceived and actual individual injustices, and we should seek to clear them, but for now it is the systemic ones that we need to worry about.
*Note that I don’t believe, for now anyway, in a financial transaction tax as has been mooted by some. The call is for a, say, 50 cent tax on each financial transaction. The difficulty is in understanding exactly what a transaction is. Traders could simply gather up all trades for a day between themselves and other institutions and call them one transaction. Alternatively if the tax was based on the number of securities exchanging hands, then bankers would simply construct products with higher face value and lower numbers of securities. And so on. For every tax a financial product can be created off-market that avoids the tax, but only the largest banks will be able to do this. The smaller investors would pay the tax regardless.
Lance Wiggs 
This is a great, thoughtful post Lance. Certainly being away from New Zealand in the last year, and working with American colleagues, I can testify to your dream of NZ being the 1%. IMO, finance has a golden opportunity to redeem itself, lead by people who have both the skills and empathy to do so. Impact investment is a growing asset class that’s looking to make a difference, with many HNW individuals contirbuting.
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Lance – kudos, a sobering and challenging post. Well done my friend.
To answer your question, clearly we’re not doing as badly here in NZ as the US but I agree that we absolutely need to correct our direction before we head that way. I would say that our short electoral cycle and the general ignorance amongst the populace about both financial and political matters doesn’t help in terms of creating a stable platform for socio-political change – so those are two elements I’d like to see added to your wishlist.
b
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Thanks Ben
I quite like our short election term as it means we can give sharp feedback to a Government that is dysfunctional.
We also tend to give parties a couple of terms anyway, as we see the polls suggesting National will easily win this year. Things can get unstuck in the third term though.
I like the MMP system that gives, now the MPs have sorted out the modus operendi, a certain degree of power to minority parties without ceding control.
I like that MMP, the parliamentary system and the excellent Civil Service mean that policies and laws are made on the basis of evidence and analysis and not rhetoric.
I like that our basic education is streets ahead of the USA, and we have a much more informed population. We elect on policy and action rather than the best looking or tallest, as anyone glancing at a series of pictures of our Prime Ministers over time will quickly understand.
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So who would you vote for in November, given the above recommendations? Our major parties seem to both lack the strength (and/or perhaps vision) to implement any policy that looks past their 3 year term, as it might be unpopular with their constituency. It seems to me that the Greens are increasingly the only party that are thinking about taking the harder long term policy decisions.
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Each party has good elements, and each has some legacy, and we need all of them (excluding ACT this time) in parliament.
I do like the Greens on some policies, but they are few and they still hold some views that are untenable in today’s environment.
Labour are still in the wilderness after the Clark years, and need to present a more electable team in order to get back into power. It will take another election and I feel for their leadership who are marking time while the next generation emerge.
We must have a strong Maori-based party to ensure we are all in this together, and to grow a New Zealand that integrates the strengths of us all.
National will emerge victorious this year as they have, in their first 3 years, managed to not let the wheels drop off an economy that has been battered by the winds of the GFC and shaken by the events in Christchurch. The were a relatively steady hand on the tiller and yet they made some tough decisions that need to be made. For better or worse we have UFB and we have some long overdue infrastructure projects. I’m proud to see John Key representing us as PM (a 3 line speech at the RWC was perfect), but I was also proud of Helen Clark in the role (her current job speak volumes). Each of them, in their own way, presents NZ superbly to the world, and each of them genuinely cares.
Indeed that’s something we can say about almost every MP – they are engaged, work extraordinarily hard and they care deeply about New Zealand and New Zealanders. So long as they are willing to sit down and work out the right answer I am happy.
So who will I vote for?
I don’t know yet.
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National’s free ride into another term will spell doom for NZ’s long term economic prospects. The mere notion of asset sales is dodgy, but they would go so far as to cherry-pick the five top performers and guarantee the eventual loss of billions in reliable dividend income. The best analogy I’ve seen is quitting one’s job in order to spend the accrued holiday pay on luxury items. Our sovereign debt rating will continue to soften under a tax regime which does nothing to either encourage savings or rein in rampant speculation in property, and no one in charge seems to be bothered by the government’s reliance on “hot” international capital markets to pay for tax breaks. The rot at the core of our economy will be camouflaged by commodities exports and high value-added manufacturing, but only as long as buyers have the cash. The looming collapse of Eurozone bonds will infect the supposedly robust Asian markets, and the US is a lost cause. Meanwhile, working families will continue to struggle as prices and interest rates rocket upwards, and overseas banks, oil companies and supermarket chains will happily take the proceeds.
A damning feature of our minnow politics is that the PM’s cult of personality drives an election far more effectively than the policies that his party will implement, and we are about to pay dearly. Bankers and financiers have run the global economy off the rails. Why in the world do you expect a government led by one to do the opposite in NZ? Asset sales under both Labour and National over the past 25 years have siphoned as much as 14 billion dollars from state acounts and turned us into a debtor nation. Labour may be in the wilderness in the smile-and-wave sweepstakes, but at least they have policies to address structural distortions — they’ve mooted a sensible CGT regime and are not willing to sell the public’s herd in order to turn around and pay to keep milking it.
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That’s an awful analogy. To make it reflect better on reality you’d be going from 40 hours per week to 21 hours per week, with the payout being equivalent to ten or more years of working that additional 19 hours. If you’re earning, say, $40k now that’d be like dropping to 21 hours (and $21k) to redeem $190k of holiday pay. I thought mine was bad when I had three months of leave owing!
To further improve this analogy, you’d also have to spend the extra 19 hours you’ve got free each week wisely investing the $190k to improve your quality of life.
It’s still an awful analogy, but far better reflects the actual policy than your version.
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Penny’s right, and I’d add that all of our political parties seem to be pandering to one group of individuals: retired people and those close to retirement. They’re proposing to raise taxes or sell assets so that they can afford to give pensions to everyone, regardless of whether they actually need them. It’s stupid and destructive approach to welfare, and it’s costing us billions. It’s like they think the country will cease to exist in thirty years. I can’t name one party that has outlined a vision for New Zealand that I can share, and I’m the same as you, Lance: liberal values, fair taxation and welfare, and health and education free or close-to-free for those that can’t afford it.
I have no idea who I’ll vote for. I don’t see one party standing up for the economic interests of the next generation. I just see two major parties who want to impoverish or tax us to keep paying for the last one.
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I do agree that Governments or prospective Governments need to think long term, but I feel that they largely do so. A fair tax system is part of ensuring we have the decent society.
We do have to make sure we look after all of society, and we have a duty of care especially to the elderly. That means a minimum livable income for everyone.
For the elders the gold card, maligned as it is, is an incredible tool to get people off their backsides and out into the cities and country. The marginal cost, and I am making this up, could well be underneath the reduced health care costs as a result of more active people.
But the concept of retirement age is increasingly ludicrous – ability to work is based on health, and while it is a function of age there are plenty of 70 year olds that are able to lead active work lives, and plenty of 50 year olds that are not. So a defined income and essentially free health along with incentives to work are elements of a good system.
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Thanks Lance, for laying out our situation so clearly.
The next question, as Penny raises, is how to achieve this, given that we have the choice between a party that represents the 1% and a party of muppets?
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The 1% part is the ACT party. Don’t vote for them. The National party have a pretty broad group of people, and while the PM and Minister Joyce are self-made, they seem to be in power for the right reasons, as their actions to date show. Labour is rebuilding, Greens are smart in places and the Maori party has a key role to play.
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Penny is right – based on your list (although perhaps not the celebration of business thing although even on that they’d argue) the Greens are the only party with answers to your questions…. who would have thought huh?
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Thanks Lance, great post.
We’re a nation of 4.3(ish) million people which is very VERY small.
And that’s the opportunity – we don’t have to act/be a large, bureaucratic country that moves slooooowly but one that can (if we want) get everyone in a ‘room’ and get on with it!
I agree with Ben (Kepes) that we need some focus on engaging the 4.3 million – something that politicians aren’t very neutral at.
But really, it’s not that many people surely.
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Great post Lance, thanks for sharing.
What your post (and some of the comments) highlighted for me is the real lack of a clear, unifying vision for our country. Most of us will be able to attest to the difficulty of working for a business or organisation that has no vision, a vision that is convoluted and meaningless, or one that is simply uninspiring. I feel the same way about our country.
What are we as a country trying to achieve? This is what I want to hear from our political leaders. Something aspirational and inspiring that people can rally behind (i.e. not ‘to catch up with Australia’). With a vision set, the decisions about which levers to pull to achieve that vision should follow (just as they have in the vision that you have shared).
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Yes We Can. I’m not sure we need a vision for the country, and we certainly don’t want one from MPs as it would change every three years. In our hearts we know what we want to be something like: a fair, decent and welcoming society, an amazing place to live work and play and a prosperous yet environmentally sustainable economy.
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We’re a stadium of 4 million. How do we grab the the momentum and enthusiasm evoked by the RWC and channel it to making NZ the 1 percent?
Thought provoking post Lance. Thank you.
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It certainly is a sobering reminder of where we don’t want to take New Zealand.
I must admit I too have long since given up on expecting any meaningful economic leadership from politicians. Leadership must come from community level.
But I’m left with a contradiction. On the one hand more and more smart people are realising that the underlying mechanisms of capitalism (and democracy?) are flawed. On the other hand, many of us are putting considerable effort into promoting entrepreneurship as a remedy. Are we part of the solution or the problem?
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This is a question that has been lurking uncomfortably at the back of my mind since I completed an Mba five or six years ago – capitalism requires the ongoing discovery and exploitation of new reserves/resources, and was borne of a time when such a proposition was tenable, as it was unimaginable then – say around the Industrial Revolution – that the earth’s massive bounty would ever be depleted. Now we are starting to see the light from the train coming from the other end of the tunnel.
The solution is not yet apparent, but i think that with deep thinkers such as Lance and some truly inspired leadership, as a people we will move beyond the looming crisis. I’d like to be more specific, but the actual how of such a success story eludes me, although I sense that entrepreneurship and fair reward will lead the way.
Thank you, Lance for posting this very well-considered and timely piece.
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Great post!
Once upon a time we might have been able to rely on Labour to work on this type of stuff, but those days seem well and truly gone.
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As an American with Residency in New Zealand… Hell, yes, Lance. Hell, yes.
Watching the US gives us a perfect example of what some policies lead to. NZ is a haven. We, the People, can alter the political landscape to make a fair and balanced New Zealand. It is a wonderful place. It does have a real advantage over the USA. We don’t need to look for someone to follow. This is our home and we can be the nation that everyone dreams about.
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Your final list of points looks pretty similar to what I’ve been trying to judge the parties against. None of them seem to fit the bill though…
On the topic of a transaction tax, how do you feel about it as a system for stopping high frequency trading?
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High Frequency Trading is not necessarily a bad thing, and you can just take it off-exchange to avoid a tax. It arbitrages out discrepancies between and within markets. The question is what are you trying to solve here.
Also a transaction tax needs to be global, as those transactions will just move to a better market.
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Good analysis, I agree with the above posts that only the Greens have a clue for us and the country. There is a serious danger that the party of the 1% could be elected with a full majority, This would allow them to lock in a major abstraction of power from the people – The TPPA, Dropping MMP, Union busting rules, State asset sales, etc. Even right of centre voters should seriously consider the perils of giving an ex finance trader this much power.
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I don’t agree that National is the 1% party (see above). However as someone raised during the Muldoon era I do get very concerned when a party has complete dominance of our single house. That’s why we need balance, and even if National win I hope that they renew their agreements with the minority parties and continues to work within the established frameworks.
Parliament is only as good as the opposition – and we need the Greens and Labour to really step up as well.
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My main worry is that many of National’s financial backers are very much in the 1%, and if National get a better than 50% majority this time around, then those people are going to lean very hard on Key to implement some fairly nasty economic and social policies that he’s refused to implement so far, over the objections of many in his caucus, with the excuse that they would not get the necessary votes, would not be in line with the coalition agreements, etc, etc. Take away those excuses and I think he’d buckle, to the considerable detriment of us all, save perhaps those who profit from others suffering. I am just speculating, and I’m sure many of my friends would dispute that Key has significantly more conscience than his peers, but I think you’ll agree that it sounds like a plausible scenario. On the whole, fantastic and insightful post. Kudos.
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Again, re-asking penny’s comments to the masses.
We all think this is a good idea. Who’s going to do it? Which party can provide this assurance? Is there ANY political party in NZ that can?
I speak for myself here, but i’m at a total loss as to who I should vote for. I believe in the bullet points lance has itemised but I don’t see any political party that is going to do them all?
Greens it is then?
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I go for the candidates first – are they worthy of being your representative? Do they work hard for you and NZ, and are they thinking or just regurgitating party rhetoric?
Greens might have the advantage in some areas, an good on them, but it is easy to be ideologically pure when you are not running the show. Real politics also means bowing to concerns from our trading partners and the superpower, along with balancing the economic parameters.
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Why not form a Wiggs party? :-P
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Yes, give your party vote to the Greens as they will provide a balance to some of the ultra rights in the National camp. Yes, we are very lucky to be New Zealanders, but there’s a huge and growing gap between the haves and the have-ots.
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Nice one, Lance.
Some (possible) steps were addressed @ the NetHui – transparency in government is crucial, as a means of limiting business’ influence: separation of Business & State for much the same reason the separation of Church & state
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Great post thanks Lance and some great comments too…
But the basis of all this has to be a strong durable economy. To me the Greens want to achieve some of the wonderful things most of us would agree with, but before we can pay for them – and taxing the rich any more will simply send them offshore.
The issue I think is the game playing – the clever accountants and lawyers who devote their lives to working out ways for their clients to avoid/evade tax. The stock market players who seem to do everything except own stock in companies – the original reason the market is there!
Maybe the answer is to simplify? Make the stock market a place where shares are traded – that is all. Make income tax a flat no-way-out %. No rebates, no exclusions – everybody pays.
Unfortunately simplify and Government don’t seem to fit in the same sentence all that well.
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There is a lot to be said for simplification – let us know the rules and just get on.
While I don’t agree with all of it, I must point out that Gareth Morgan and Susan Guthrie’s Big Kahuna has some interesting ideas. Check out their presentation and website for a quick overview, or just buy the kindle book.
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Probably a reflection of my fundamentally hippie social circles, but I think I now know more people who would like New Zealand to be run like this than not. Hopefully we’re witnessing the rise of common sense as an electable policy.
You asked how bad it is in NZ? Not nearly as bad as the USA, but we could do well to heed the warnings. I’m staggered by the mountain our ‘newly married, want to have a baby’ types have to climb and think that if two degree qualified young professionals can’t afford the deposit on a house then we’re doing something very wrong. And we need more jobs. It’s all well and good to say we need more high value jobs, but I think most of the unemployed would just like one that is non-offensively paid and for which they don’t have to move away from family.
But I think we’re headed the right way. As you say, we’re blessed with a society that (by and large) does not want to treat each other harshly, and if the people at the tops of society’s various ladders can agree that helping people up is more important than getting even further ahead then we’ll probably go quite well. Your post, and the resulting publicity thereof is a step in the right direction so … thanks :)
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Thoughtful and thought provoking post… Agree with heaps you say! NZ can and should do better and Kiwis need to engage in this discussion and get involved.
However as a Kiwi & America, I’m v uncomfortable with “Let’s make NZ the 1%” as a headline. The term “The 1%” is used in the US to discuss the increasing wealth and power of a very small group, despite (and even at the expense of) the struggle and suffering of a disempowered majority. “The 1%” in America doesn’t just mean people who have opportunity and lifestyle, as you suggest, although that is obviously a part. In the US, “the 1%” earn over $1.1mil a year and own 34%(!!) of the net worth of the country. And growing! The top 10% have over 2/3 of the countries net worth. (More demographics on the distibution here: http://motherjones.com/politics/2011/02/income-inequality-in-america-chart-graph) This is about power and systemic inequality and who benefits. One of the concerns about the 1% in the US is that they have more then they could ever use in terms of lifestyle and opportunity, and wealth, and yet continue to amass more for themselves. I would be sad to see NZ or NZers aspire to “be the 1%”, nationally or globally. Now from your post, I don’t think (and hope) that’s the kind of 1% you mean! But considering the headline being tweeted around, just saying you should consider carefully how ‘the 99%’ view the 1% in aspiring to make NZ part of it :)
I think NZ has the opportunity to lead by example, to reduce inequality and create accessible opportunities for NZers which benefit society as a whole. To show we can flourish together. That is way better than ‘being the 1%’ in my book.
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I like how a lot of your potential solutions revolved around simplifying things, that ties in nicely with our size – we don’t have to try to be like the US, we can run the country differently because we ARE fundamentally different.
Maybe what people are trying to say when the Greens seem to be the only party with solutions is that they are somewhat free to think outside the square… If we could adopt some of that thinking across the board, and combine it with the stuff larger parties bring to the table, we might start getting somewhere. Labour might be in a good position to do this as they re-group.
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Well done Lance. The media blackout of #occupywallstreet is as corrupt as the society that gave rise to it.
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I wonder… how many of you voted for Obama in the last presidential election?
If you did, you brought this upon yourself.
There will be another election in a little over a year.
I’ll see you there.
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Don’t blame me – I voted for Kodos?
Obama was and is inspirational, but he is confronted with a system that has been systematically attacked by special interests to a point where change is unworkable. It’s not something that Churchill or any former US leader could resolve. While I am looking forward to Obama’s next term where he does not have to worry about re-election, it’s hard to sep being continuously disappointed at the entire system.
And let’s be fair – the opposition have done everything they can to attack the administration and its policies, often in the face of logic and common sense. They deserve the lions share of the blame.
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Yea. Inspirational. Like his friend the Reverend Jeremiah Wright.
Mr Obama is the biggest mistake this country has ever made, at a crucial time, and the Democrats surrounding him are too focused on their own power to reel him in.
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At this end of the world in New Zealand we have a different perpective of politics. I just watched, for example, a fun debate held regularly with members of parliament (MPs) from all parties at a pub. It’s on free to air TV. Our MPs talk to each other, work well with each other and respect the facts and the analysis from the government employees. They also love a good argument, and all of the debates in the house, including question time, is on free to air TV.
We are consistently top 3 least corrupt and easiest place to do business, and have a strong social welfare program that means we don’t have homeless in the streets – unless they want to be.
Religion, mainstream or wacko, has little to no place in politics, even though parliament opens with the Lord’s Prayer each day.
But what makes me sad at your comment, and many others like it that I see on US sites, is the assumption that everything is bad and that it is all Obama’s fault.
The guy has been able to get a lot done (Osama, Health Care, GFC management) in the face of some rather incredible opposition from the Hill and he media. He cannot under US constitution manage by fiat and tell people what to do – but must work with the Senate and Congress to get bring him laws he can sign.
Blame the Hill, blame all of washington, blame a system that has failed, but pointing the finger at one guy is naive.
The best source of news is the Daily Show. Watch it.
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One thing I didn’t point out – the phrase “1 percenter” is also bikie culture code for outlaw motorcycle groups.
It comes from the Hells Angels and other clubs (‘outlaw motorcycle gangs’ in Wikipedia speak, ‘clubs’ in internal speak) who adopted the slogan after the American Motorcycle Association allegedly stated that 99% of motorcyclists were law abiding.
It’s interesting that the 99% tagline has been adopted by this group as it implies that the 1% elite are also outlaws.
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True Lance, interesting thing to point out! There certainly is a clearly linked “a few spoiling it for the rest of us” idea in there… 1% as outlaws: who knows might catch on :)
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Education is key, Ben raises a good point about the widespread ignorance out there. left leaning politicians, activists, intellectuals and entrepreneurs don’t even speak the same language as the poor and working class who need to be our partners in a renewed social contract.
My other thing is this tall poppy, “rewarding entrepreneurship” line – as a young entrepreneur who has made a lot of sacrifices to avoid being caught in the rip of class realities, and is moving into a more comfortable phase of my life, I don’t understand why entrepreneurs feel they need 10’s of millions of dollars to feel successful and rewarded. My grandfather set up the first optometry practice in waitakere city, and surely went through some lean years in the beginning – but he never became wealthy and ostentatious in any way. Where did those values go?
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I grew up with a lower-middle class single mother. I was bullied through middle school and most of high school. I went to college for a year and a half. I lost my financial aid and left because I partied too hard when I was there. I’m not a coastal liberal who feels like the world owes me something. I went into the working world and found a job. I make more than most college graduates my age, I have insurance, I have a home that I knew I could afford, and I don’t feel like the world owes me anything. I’m sorry, but this whole bunch of pictures seems like a bunch of self-indulgent bullshit. If you don’t like your lot, move on. I’m not a greedy Wall Street suit. I’m a Midwestern man who has struggled up the ladder and made a life for himself. My wife is a public defender who will pay more on her student loans than our mortgage for the rest of her life. Get off your ass, stop eating takeout Chinese, and take responsibility for the world of which you are a part. And for fuck’s sake, if you want public healthcare, social security, and all the other public programs to which we’ve all become accustomed, stop bitching about taxes.
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this is so depressing!….We believed that US is a highly developed country….but these revelations are portraying something else…We hope that these youngsters get some job to live along…Life is soooo hard on these people.
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So you are all losers. Don’t blame me. I work 45 hours a week, and have been employed for the last 39 years, steadily. If I ever lost a job, I got another one, no matter how lousy it was.
I drive old pickups, don’t spend money on restaurants or stupid movies, and pay off my loans before spending more money. You are idiots, and I am not.
I have gold, guns, and a huge 401K. I have a great pension, and will retire in two years, at age 65, with Medicare.
Look at yourselves, losers, not me.
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By ‘You’ I assume that you Ron are referring to the people who have posted on wearethe99percent.
As I said in the post no doubt some people made bad decisions. But did we set them up to succeed? Did they receive a solid education that taught them how to correctly deal with incessant bank offers of easy money from 2.9% APR* high limit credit cards?
They didn’t.
And then there are the people that made good decisions, but are stuffed by medical bills that came out of nowhere.
But good for you – you worked hard, were not afraid to quit one career and move to the next, and took responsibility for your income/expenses ratio.
Without the rhetoric that’s the sort of people NZers are. We don’t tend (less so recently) to over-borrow or spent money we don’t really have – at least not as much as in the USA. We are generally happy to work in any kind of job, whether it’s in the service industry (McDonalds and a restaurant washing dishes for me) or the rite of passage we call OE (overseas experience) – working in the UK or Australia in all sorts of jobs. I’ve worked in mines, smelters, a tin can factory, and flash offices. I’ve stayed in shared houses, the best hotels in town, and in tents and on beds that had mattresses shaped like a U. I’m pretty typical of Kiwis that get away and return.
We are a caring society – and the term losers to me implies that we have somehow failed to help people succeed. Today’s losers are tomorrows freedom fighters, and an unfair society risks everything by abandoning the masses.
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“Did they receive a solid education that taught them how to correctly deal with incessant bank offers of easy money from 2.9% APR* high limit credit cards?
They didn’t.”
I’m sorry, but I just don’t believe this. At all. Perhaps it is just the photos you featured, but only a couple are in anyway sympathetic. The girl who has not been to the doctor in 8 yrs? Really? How many concerts has she attended? Does she have a cellphone (forget even an iPhone or similar)? For 1 month (or maybe 2) she could not skip getting her hair cut/styled? Even without health insurance, it only costs about $100 to get a physical. Depending on where it is done it can even be free. Not going to a doctor for 8 years is a *choice*! If you are wealthy enough to have a computer and internet access you are wealthy enough to go to a doctor or a dentist at least once a year. Most of the ones you featured have lots of student loans or otherwise mention college. We are to believe that even with college degree(s) these people don’t know how to deal with “bank offers”? Any if they continue to spend more than they make – something even a 10 yr old should understand is going to end badly – that I should feel somehow obligated to bail them out?
I just had a conversation this past weekend with a 28 yr who has not ever really had a job since getting a MA in Anthropology (and racking up > $100,000 in student loans). He was upset that Obama’s jobs bill would not do more for his job prospects as “it is going to [create] infrastructure and construction jobs but won’t help me at all.” And there you go. No way would he even *consider* applying for one of these jobs. We in the US have an acute shortage of trained vocational workers (plumbers, electricians, etc). We actually need to fill jobs and there are quite a number of vacancies available around here. But I see far too many kids – and their parents – who simply recoil at the thought of doing an actual manual labor type job especially if they have gone to college. Vocational education is far less expensive to get, the knowledge is far more useful in most practical applications and while you might not make it into the rarefied air of the 1% as a plumber you could easily make enough to feed yourself and your family (and not worry about your job being shifted off to China).
And you know what? I’m also the 99%. It’s just that I have little time for overindulged kids who can’t be bothered to do real work but have plenty of time to whine about having to pay for high-priced, worthless degrees or high credit-card debt when *they* chose the school & degree, *they* signed on the bottom line & agreed to repay those loans, *they* are the ones that just could not live without the cellphone or gadgets or social activities or backpacking across Europe and so ran up the credit cards (no worry, I’ll pay it all off when I get that dream job in my chosen field making $150K+…).
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Spot on, Mike! I read through all the above photos and thought “what a bunch of CRAP”. I don’t have a degree and neither does my husband. We have scrimped and saved, and continue to do so while paying for THREE kids to go through college. A fourth one will be hitting college just as the oldest graduates. We have taken a firm stance that there will be no loans taken out for college degrees. Our kids work as well.
Not going to a Doctor is completely a choice – Every city has some sort of clinic with sliding scale charges – all the way down the scale to free.
Kids not wanting to actually “work” is epidemic. In my sister-in-law’s law firm, she frequently had law school interns who didn’t want to be a “clerk”. They thought they could walk in a do “real lawyer work”. They didn’t want to put in the hard grunt work. So this problem of not wanting to do manual labor extends to tedious work in office situations as well!
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“Vocational education is far less expensive to get, the knowledge is far more useful in most practical applications and while you might not make it into the rarefied air of the 1% as a plumber you could easily make enough to feed yourself and your family.”
I had to smile at this. One of the guys I grew up with ended up being a plumber, he now has his own plumbing business and is a millionaire. So I guess you can get a Vocational educate and make it into the 1%.
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I can pretty much guarantee that my POV will not be popular, but I think it needs to be said.
Possibly NZ’s biggest problem in all this is its’ attitude toward Australia. As an Australian attempting to live in NZ (and being the 1 Aussie to do so compared to every 20 Kiwis who fled the other direction) I have found the prejudice to be deep rooted, reasonably subtle at times, but overwhelmingly present.
The sentiment that seems to always be met with approval, from Kiwis of ANY political stripe, is that the last thing NZ wants to do is follow in AU’s footsteps, “try to be more like Australia” or basically implement any policy which has allowed Australia to flourish. This is a terrible, terrible thing to have to say, but seriously, the biggest impediment to all the sensible policies championed in this post, is the fact that Australia is doing ALL THESE THINGS.
* Capital Gains Tax (on all but primary residence)
* Tax Free Threshold (tripling in AU in 2012 when the carbon tax comes in – also a brilliant move)
* Decent minimum wage (even a $ equivalent value to the AU minimum wage would be a start)
Businesses trying to establish themselves in NZ have a very hard time implementing fairer policies and higher wages when existing businesses pay poorly: the bar is set lower and you’ll fail even when you do things the right way, because the competition who is paying their employees less will be able to undercut your profit and drive you under. You can’t change things unless government changes policy across the board, to level the playing field.
Employee fraud is *more than double* in NZ compared to Australia – why? Because employees consider employers to be the enemy. The difference in Australia is absolutely stark. If you don’t have a ton of Old Money, don’t even think about trying to start a business in NZ unless you plan to be a sole trader forever, and don’t even begin to think of actually trusting your employees should you reach the level of success to require them.
So to try and redress the imbalance, the person at the very bottom needs to be given a fairer go and EVERYONE will benefit, the employees, the start-up business owners, and everyone above. This is not happening in NZ in any way, shape or form, and won’t, until the above three points come into being.
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I don’t see it quite that way – perhaps they don’t want to be seen to follow Australia, but they will certainly copy and paste good policy. Glad you are here by the way.
I’m not a believer in an unusually high minimum guaranteed wage – but in minimum guaranteed income. I do like lower youth rates when there is an alternative to be at school.
First I’ve heard of the fraud problem. Goodness me – Australia more honest than NZ? Perhaps the crime is more institutionalized. I’ve helped start several and seen many other businesses start in NZ. Old money might help, but new money and no money is much better.
Overall I believe that the oft-quoted goal of chasing Australia is rather pointless – whether we achieve it or not. Instead Australia and New Zealand have a lot to give each other, and work together pretty well already. We are each tiny economies and populations in the scheme of things, but are ideally situated to both take advantage of markets opened up in fast moving economies across Asia.
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So some people make bad decisions in life or have some hard luck/fate, and rather than work their way out of it or stop behaving negatively, or depending on their families, all of us who work our asses off have to bail out these people. Real self-esteem is earned in life through trial-and-error, failure, achievement, and standing up for oneself. It’s not won by crying online via your iPad while scarfing down Cheetos, and begging for extra handouts from working people. When I look at the pictures of the people in the occupywallstreet parades, I see a bunch of spoiled, lazy, young misfits who believe the factually incorrect liberal narrative promoted by Chicago-style propagandist organizations who are trying to boost Obama’s reelection efforts. Other than that, have a great day!
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Whatever else you Kiwis do, don’t relax your immigration laws. I am a U.S. citizen who fell in love with the people and geography of New Zealand in the 1990s, and applied to be let in: alas, I was already too old (41) and not independently wealthy. Today, my husband buys Power-Ball tickets every week. Should we ever win big, we will reapply to NZ Immigration, and, if accepted, will build a little house in Ahipara with a dedicated library and an airy, light-filled studio for my husband to paint in, and a quiet corner stacked with books where I can scribble away.
None of those things is possible in the U.S. today, not if you’re a member of the 99%.
Kathy Fitzgerald
Oak Island, NC
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>None of those things is possible in the U.S. today, not if you’re a member of the 99%.
They’re not possible in NZ either, unless you win the power ball.
You want your husband to paint, and you write. These are occupations of the independently wealthy, or perpetually poor. Society does not owe you a life of idleness.
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Facepalm:
We agree that “society” doesn’t owe us anything. We are both in our 60s. We both have worked since our teens. We install and maintain gardens—actual manual labor!—for our living. We own our house. We own two pickup trucks, one a 1993 Chevy, the other a 2007 Toyota (the last available model with crank windows). We have no debt. What we do have is private health insurance that costs about 20% of our before-tax income.
Don’t lecture me, you who snark anonymously. You haven’t even begun to earn the right.
Kathy
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Some of these people are suffering through no fault of their own, but; some of these posts piss me off!
People racking up $170,000 or even $80,000 in student loan debt? How the hell do you do that? If you’re something within 200% of the poverty line your books and tuition are paid for by the Federal government. All you have to do is pay for living expenses. I graduated without being a single cent in debt despite having to support my son and my worthless ex-girlfriend along the way! How did I do it? I worked 35 – 40 hours a week between two minimum wage jobs, along with going to school full time. I got my degree in Finance and Applied Economics from a top 20 University also, so it’s not like I had a slacker major in underwater basket weaving.
You have 3 children that you can’t afford? Stop squirting out kids that you can’t support! After all you are a woman, so unlike a man you actually have a choice in the matter! I say that as a single father, raising his son, receiving no child support from the mother myself. Of course unlike you I didn’t have a choice in the matter.
So you’re a felon and you can’t find a job? Maybe you shouldn’t commit serious crimes! When you act violently or steal from them they won’t want to hire you. They’re afraid you might hurt them or steal from them.
If all else fails I hear the Army is still hiring.
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agree 100%
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Err, I suspect if he’s your son then you did have some choice in the matter… Perhaps not to the same degree as his mother, but most people know the risk they run when they go poking around there ;)
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Ian: What are you talking about? Once a pregnancy occurs only women have a choice whether or not to unilaterally abandon their parental responsibilities, men do not. That’s what I was referring to.
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The guy has a choice a bit earlier in the process though. It’s one of the risks that many of us choose to except in exchange for the, err, reward… I do realise that once she’s pregnant there’s not a whole lot the guy can do to change the situation.
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“The guy has a choice a bit earlier in the process though.”
Ian:
The guy has a choice whether or not to have sex. That’s not the same as choosing whether or not to surrender your parental responsibilities after a pregnancy has already occurred. In the United States, where those holding the signs are from; the supreme court has already specifically rejected the argument that an individual is able to choose whether or not to be a parent, by choosing whether or not to remain celibate.
Why do legal arguments matter in this context? Because we’re talking about legal responsibilities! Which are enforced using the governments monopoly on legal violence! If a man doesn’t live up to his parental responsibilities men with guns with show up at his house and take him to jail!
“I do realise that once she’s pregnant there’s not a whole lot the guy can do to change the situation.”
That’s my point. Women can choose to unilaterally abandon their parental responsibility once a pregnancy has occurred. Men cannot. It doesn’t matter if, as in my case the woman has sabotaged the couples agreed upon method of contraception. By poking holes in condoms, by not taking birth control & not informing her partner, or even by taking sperm from a condom and injecting insider her. It doesn’t matter if she admitted doing any of the above. It doesn’t even matter if a woman has statutorily raped a 12 year old boy.
The woman can unilaterally decide whether or not that man/boy is going to be a father and it’s totally legal. Then 89% of the time she’ll get primary custody along with child support.
Recently in my state a teacher raped her 12 year old student. She ended up pregnant and decided to keep the child. For raping a child she only got sentenced to 3 years of probation, she also got full custody and child support. If a man raped a 12 year old girl, forced her to have the child, only got probation, and then the courts made that girl pay her rapist child support, feminists would be screaming bloody murder. So why the double standard?
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As a Brit who has been resident in NZ for almost 3 years now I’d agree the country is indeed a haven of sorts and will hopefully go on being so for many years to come – I mention this to many people I speak with and they are often surprised by my assessment.
I can’t speak of the US but the UK is surely as badly financially managed and has debt and overpopulation issues which give a sense of looming societal collapse – well that was my thinking when I made the move here!
There are definitely issues of poverty to tackle in NZ and I’ve witnessed things I’d certainly never associate with the well executed marketing to immigrants. As someone working 3 jobs (1 as employee, 2 as startups) there is hope here in the ability to get things off the ground easily without the ever present regulation of the UK.
The price of – especially in Auckland – and reliance on property as an investment path is to my mind the root cause of so many NZ problems. It concentrates wealth in the hands of those who can afford to buy and demotivates many who dream of home ownership and the stability and civic engagement I think it brings.
A capital gains tax might level the playing field a little but probably be a nail in the coffin for any party promising its introduction. And I’m no fan of pension plans (having lost money in a UK scheme collapse) but a compulsory Kiwisaver/national investment fund providing capital for new businesses would also help.
So many people I’ve met have expressed surprise I chose NZ over Oz – often as they are about to make the move there. Maybe the grass is always greener wherever you are – I really do believe though that the population size and general ‘can do’ attitude of so many citizens could deliver benefits long term. We just need some real leadership and a sense of common purpose (Christchurch student army?) and the current policital parties are anything but appealing!
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Lance said…
(excluding ACT this time) in parliament.
Lance, the problems in the US comes from the progressives (which are both the Republicans and the Democrats). They’re both for big GOVT and over-regulations. The financial crisis is a product of the govt interference in the markets. They say that the US is a free (or more freer) market system, however Donald Trump said recently on Fox News, it takes about a week to apply for a permit in China to build a hotel there while it takes years in the US to get a permit for the same project, while the lawyers of both the permit applicant and the state getting paid huge amount to battle it out in court which leads to prolong waiting time.
Both National and Labour are the problems here in NZ. Both big GOVT advocate. That’s why if ACT is out (because Ben Kepes is correct – the general population is simply uninformed in economics and political issues), then sorri, the problem will get worse. The downgrade of our credit rating was quite obvious (too much borrowing). The National party is no difference from Labour. ACT is the only party with a solution. Keynesian economics (is what both National & Labour worship) has failed. Still some misguided idiots out there still blame the failure on capitalism and Milton Friedman, which is completely wrong. The blame should be pointed at government interference, that’s the root of the problem. That’s what causes the problems in the first place.
Here are some interesting videos for your readers who are completely ignorant of what causes the problems.
Professor George Reisman identifies the root cause of the crisis
The videos are good start, but if any one here wants peer review published economics research on this, then I am happy to cite them here if they’re not convinced by the arguments put forward by the scholars in those videos above.
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Whoa, there are some seriously unexamined thoughts in Falafulu’s posting there. Time and again it has been demonstrated that where there is asymmetric power and no rule of law (or regulation) then those with the wealth continue to act in their own interests and not those of society as a whole. i.e the rich get richer. once an organisation achieves a position of power and influence they start to distort the economic landscape so that the ‘theoretical’ concepts of economic modelling no longer apply. Case in point, dumb bankers who lend at high risk should not be insulated from defaults. The supposedly free market should allow creative destruction of those who do so. However instead we see the threat by the banks – to trash the whole economy, if they are not bailed out with public money.
Similar rules need to exist to prevent the externalisation of costs – resource mining, pollution, labour exploitation etc.
ACT seem to think that ‘no public purse’ means no opportunity to exploit the people. Think about that – is it really true? You might pay less in government taxes – but you will end up paying a whole lot more in monopolistic pricing for energy, communications, food, health, water etc etc.
Andrew
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I’m not sure why you would quote Donald Trump? Surely the only reason he’s not in jail right now is that, as they say, if you owe the bank a thousand dollars and can’t pay it, you’re in trouble, but when you owe the bank a *billion* dollars and can’t pay it, the *bank* is in trouble?
Leaving him aside, what do you say to those who have claimed that better regulation could have prevented the predatory lending, the insane over-leveraging in OTC derivatives, the golden parachutes for failed executives who actively destroyed shareholder value, the tax-haven shopping, the risk-hiding and the ever more duplicitous special investment vehicles?
It seems to me there’s no doubt that the US govt bureaucracy in particular is riddled with corruption, regulatory capture, careerism and general incompetence, but there’s remarkably little evidence that “less regulation” would have prevented the GFC, given that the countries with better (and better enforced) regulations around lending, leverage, securitization, transparency, accountability, advertising, bribery, consumer and investor protections, etc, etc, seem to have had very little part to play in the GFC, while those who ignored such niceties and let their banks and corporations run rampant seem to have had rather a lot to do with it. Perhaps my limited knowledge of such things has let me down here, and you can explain to me the error of my ways.
Meanwhile, on the subject of this Reisman chap, perhaps you can tell me if he has anything approaching a workaround for Stiglitz’s nobel-winning demolition of the efficient market hypothesis by way of information asymmetry, and/or explanations of how to work around the various longstanding examples of “market failure” that libertarians don’t appear to talk about much, and/or explanations of how unregulated markets will deal with the problem of those irritating cognitive biases in humans that are never going to go away, but are so often exploited by unethical market actors?
Essentially, I am sold on the benefits of independent thinking, rational behavior, trade, non-violent interactions, keeping govt out of our lives, simplifying the tax code, and various other things libertarians occasionally profess to believe in, however, as a solution to humanity’s woes, unregulated markets appear to have a lot of theoretical and practical issues that remain, as yet, unresolved.
Hence, I’m really not interested in yet another rant about the well known failure points of socialism, but rather in folks who can credibly claim to have found solutions to the equally well known failure points of capitalism – and ideally, solutions that *don’t* require some sort of pseudomagical society of homo-economicans who haven’t got any cognitive biases, institutional biases, or past history of social injustice, in order to function correctly. In light of that, do you think this Reisman chap has anything useful to offer?
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Thanks for the refreshing post Lance. I would add the cure to the cause of the problem: The banks.
I will articulate the problem banks in 3 different points.
Number 1)
There is no reason in this world, to give to a small number of people, the privilege to sell money at a cost that is 10 /15 times higher than what they pay for. Money is a necessity and everybody need to bank, just like everybody needs an health care and a school like Lance mentioned. And while a private hospital is welcome as long as there is a functional public one, what I see as immoral is the exclusive privilege banks have to create money out of nothing, skimming our economy of important resources that at the moment leave our country for overseas shore.It is clear that banking is the easiest and most ludicrous business of them all. If we look at the past 50 -100 years of corporate banking in the world, the number of banks that went bankrupted can be counted on the fingers of one hand, in other words there is a clear imbalance between who does take risk with a company and who instead take your life as guarantee. There is a big difference between who goes to work every single morning for a wage and make the country ticking along producing value and making the country richer and who had the risk taken off and given the privilege to bank instead. The banking system as it is today is the principal reason for wealth inequalities as most of the profit made by us laborers that wake up every single morning to make this country work, is taken by banks, in a form or in another, interest, fee, commissions. The banking system is none other than an oligopoly which by definition tend to reduce output and quality of service, raising the price paid by customers in the name of total profits.
All this needs to be looked at, and a solution can be seen in more nationalized banks that offer extra services for the people.
Number 2
I observed that the only common thing that I see to any economic growth is a higher inflation. If I have to think in good faith.. I say they must have missed it……
Our reserve bank governor, only talks about keeping low inflation , low wages like there is a big fear to embrace a faster paced economy.. What i am observing is that private banks tell the government what they need to do for our economy, like the interest of 10 families is more important on the interest of us all. Now Giapo, Why do banks like low inflation then? Because higher inflation erodes the real value of a bank’s assets: the money. Bankers’ interest are opposed to ours who hold the debt and if I owe you $20 dollars, and tomorrow this $20 dollars are worth less because of the inflation, I (the borrower) am better off than you lender. Every time a bank lends us money, it appears on our balance sheet as a liability but on the bank’s balance sheet it appears as an asset. If that liability loses real value.. as in higher inflation economy.. we borrowers would be all better off… so when inflation goes up, the asset the bankers own will not be worth as much as before. That’s why our governments both left and right, like to keep the minimum wage low and low.. keep interest rate edging the high side so they can cool down the inflation.. and what it does not need to be influenced is not just the campaigning, it is the monetary and economic policies of our government.
Number 3
It is about the ghost of John Maynard Keynes. He was freaking right. In monetary economics, a liquidity trap occurs when the nominal interest rate is close or equal to zero, and the monetary authority is unable to stimulate the economy with traditional monetary policy tools like lowering the interest rate. The liquidity trap applies to monetary policy in non-inflationary depressions like the one we are living at the moment.
In this kind of situation, where most of the western countries of this world are in a liquidity trap, excluding Brasil, China, India and Russia, because the relevant interest rate is already at or near zero, the monetary authority cannot lower it more. The only thing left for monetary authority is to do some quantitative easing or simply increase the overall quantity of money available to the economy.
Thats where my beloved banks do not help us again. Traditional monetary autorities and governaments tools do not inject new money directly into the economy to the people. Rather, the new liquidity created is injected into the real economy by way of financial intermediaries such as the BANKS, yes the private banks of which above. In a financial crisis, banks are unwilling to lend because it is a financial crisis out there and they are not in the mood, so the central bank’s newly-created liquidity is trapped behind unwilling bankers that are scared to lend. That’s where the problem is. Problems like this would not have happened in Europe, US, Japan and perhaps here in NZ, if the governments once passed the newly created liquidity to the banks, had also influenced their supply to the market, opening / loosening it a bit, as it would have fit/ jump start the economy.
That’s why I see that the main issue of our economy in this world is the banks work. Private banks are fine, but nationalized public banks are a necessity, like water, phone, internet, hospital and schools. Money at the end is the number one commodity we need, and we left it to the strangers to manage.
Gianpaolo Grazioli
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Gianpaolo said…
It is about the ghost of John Maynard Keynes. He was freaking right.
Wrong! The worshiping/practicing of the Keynesian economic theory has brought devastation to the world economy. Keynesian economic theory is the problem. Neoclassical economics has been falsified a few decades ago. I fee sorry for economics students of today, where they continue to be taught & learn bullsh*t neoclassical economic theories at Universities around the world. Here is a good blog post reading for you.
The Creative Destruction of G8 Economics
You can find the reference to the falsification of the foundation of neoclassical economics which is cited here:
Response to “Worrying Trends in Econophysics”
Nobel laureate economist , late Prof. Friedrich Hayek has been right all along. Crises and financial disasters are own the makings of the government via its continual interference
in the free markets.
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hi Falafulu, i said Keynes was right explaining the world what is a liquidity trap, how is it generated, why it happens, what are the symptoms. I did not say neo classical theory of economics was right.
If you read the my comment, you see it is a critic to the current system that generated the liquidity trap the western world is currently in and not the other way around.
I am a personal fan of Prof. Hayek and his theory, the only issue i have with him, is the money supply and the monetary policy should not be left in the hands of banks, private central banks and private retail banks, but being money the most important commodity, it has to be handled and managed by nationalized banks, that put the interest of the country first.
This is my view but im just a simple ice cream maker.
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I am 45, my parents prepared me for life. They taught me the importance of hard work and respect for the generation before me.
I was a c+ student in high school and with many units of community and trade affiliated college credits, yet I have no degree.
I have never had any grandeur that if I needed something someone other than my self would give it to me, and knew I would have to earn it myself.
I’ve taken 3 sick days in the last 20 years. I make a modest income for a single male in a trade I spent 2o+ years learning. Although my employer provides healthcare, and retirement, I save and invest what I can on my own, and will not rely on a government fund of which they can not manage effectively.
I also believe my employers over the past years provided healthcare because they were financially able to and not forced to.
I have chosen to not put myself in a situation of where I am required to pay child support or alimony by being responsible for my actions.
I may not always agree with my boss, but he signs the paycheck, and I can always choose to pick my tools and work hard for someone else.
Drugs, excluding alcohol, and tobacco are illegal and instead following what some of my peers do, I choose to follow the law until or if the law is changed by a majority of the people.
What you do in your personal space is your business, I will be cordial and respectful of your choices, but don’t hate me, or call me racist, or homophobic, if your choice is not the same as mine.
My father is my best friend, and my mother is my world, I will fight for my family, even when we don’t agree.
I will fight for individuals who can not stand on their own, I will assist to best of my ability those whom just need help and has earned the support i give.
I do not blame others for my failures, and understand life will not always be easy.
I have served proudly in our nations military, and will today and in the future protect the borders of our country. And if ever the day comes I don’t believe in United States of America, I will leave and start again.
Most of you who posted in this article will not agree with my statement, I only hope that you at some point can come to a common mutual respect for each other, left or right, gay or straight, poor or wealthy, and build a much stronger nation tomorrow.
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I don’t know why you are so strongly against ACT. Admittedly John Banks is a twit if ever there was one, but I think the more intelligent members like Don Brash and Roger Douglas are our best hope of achieving some of your goals. I don’t like everything about ACT, but I think they get an unfair reputation.
I’m a kiwi studying in the US, but I can’t really answer your question because I haven’t really seen hardship in either country. However, I will say this: The US government is dysfunctional. It gets manipulated by powerful special interests and betrays the poor. Corporations get massive tax breaks, while the streets are lined with the homeless. The paradox is that the government spends trillions on welfare, yet it doesn’t reach those most in need.
The most valuable thing about the NZ government is a lack of political corruption and a simple tax code. Those two things keep crony capitalism out of NZ.
I don’t think our welfare system is good enough to boast about. The good aspect is that it doesn’t come with time limits or work-based eligibility requirements like the abomination that is US social security. The bad aspect is that it is still far too complex. It allows some to be bludgers and traps others. The highest marginal tax rates in NZ are levied on the poor; if you are on the NZ unemployment benefit and get a part-time job, your benefit gets cut at a rate of 70% of what you earn (and if you have other benefits those may also be cut). I’m told there are situations where the marginal tax rate is over 100%.
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Hi Lance—
Just some technical comments though not central to your concerns here:
“The Tea Party movement was arguably taken over and certainly accelerated by Fox News into what seems to be a nutty right wing group, but the mass membership are driven by much of the same concerns as Occupy Wall St.”
I disagree. I think it’s key to note how race is a famous demarcation in US politics: It looks like each time there was a significant power shift around race that a new political body formed—and never otherwise–and usually from the defectors of whatever party was blamed for the power shift (loss). Examples: (1) After slavery ended, the KKK formed—literally the year slaves were freed—+ system of Jim Crow. (2) In 1948 after President Truman by executive order integrated the army, southern whites of his democratic party defected becoming Dixiecrats in 1948 under the “guise” of a “States’ Rights” party (eventually following segregationist Strom Thurmond to the republican party where they are regarded to have remained). (3) In 1955 after Brown v. Board school integration decision, the White Citizens Council formed—a commerce centric version of the KKK. (4) Republicans who were arguably led by the conservative press—apparently by FOX News up to election night—and specifically told by conservative Rush Limbaugh for example, that Senator Obama had no chance to win the presidency, appeared severely disillusioned with the republican party and largely seemed to have formed the Tea Party soon after his win.
Government spending and growth don’t appear to have factually been concerns (e.g., Reagan is still hailed by many of the group but virtually no republican angst has ever been registered over his bailout of S&Ls which at the time surpassed the full cost of WWII in then current US$, or of government growth under Bush—Homeland Security alone, for example, amounted to adding a Ford Motor Company to the US payroll—literally 100s of thousands of people; of course we also spent a record level of tax payers’ money finding no weapons of mass destruction in Iraq). Moreover, taxes—an apparent focal point of Tea Partiers—-under Obama, are lower than they were under Bush, Clinton and Reagan.
http://www.rgj.com/article/20110421/NEWS20/110421053/Fact-checker-taxes-lower-under-Obama-than-under-Reagan-Clinton-
http://www.forbes.com/2010/03/18/tea-party-ignorant-taxes-opinions-columnists-bruce-bartlett_2.html
More interestingly to me though are the stark correlations you find in general welfare metrics that would defy libertarian or Tea Party claims as publicly identified (GDP total and per capita, income average and per capita, disposable income/capita, % infant mortality, % below poverty, % educated, % homeowners, VC attracted in total and per capita, etc.). Red states have lower taxes and perform decidedly poorly relative to blues by the above metrics in every U.S. census I’ve examined. The only red states not relatively slammed by the metrics appear to be those with oil deposits, but even they still are not high performers. Of course I can’t articulate what the Tea Party rationale for this would be given their platform.
The OWS movement, however, displays fundamental connectivity between their articulated concerns and key prevailing economic woes: foreclosure rates, unemployment, student loan indebtedness, PAC financing, corporate taxes, bailouts, healthcare coverage, etc.
“Many of the participants made mistakes, perhaps taking on too much debt or studying the wrong degrees. But many more of them have done what society demanded of them, attending university, paying insurance, buying a car – and then got clobbered.”
More race: I observed a striking “occupation” of a factual sort in “black middle class America” before the 99%ers’ poignant public records appeared here; so striking that before occupyWallStreet formed I actually documented members of my professional network including Ivy League science Ph.D. unemployed folk, as an obscene example, in a fashion terribly similar to your posts and sent it to family as an educational and conversational tool. For sure, they didn’t pick the wrong majors, go to bad schools or do anything wrong. Things are just bad here. The U.S. has a problem.
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I often wonder at the generation now and how much they wanted, wanted , wanted to get all that they could and now have debt up to their eyeballs. Credit companies only too willing to give them more money so they could get the next tv dvd laptop car clothes. I’m not discrediting anyone who has worked hard to do it the right way without too much debt, but are some people just the result of their own choices. Harsh, but people have forgotten that there are consequences for all our choices we make.
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