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by melo
Fri May 2nd, 2008 at 09:04:45 PM EST
Even after great neuronal sacrifice trying to make sense of Bondad, Jerome and the other financial gurus in blogistan, I confess myself still more than a tad mystified when it comes to deciphering the likes o' this:
Grand Theft: Economy IV | The Agonist This leads to a phrase that you've been hearing more of over the last year, and will start to hear stated in the top down media: the Gini Co-efficient. It is another creeping colonization of mesoëconomic explanations into the macroëconomic environment. Let's take this a step at a time. In microëconomics, the distribution of income does not matter, because, in theory, those who have deserve, or will lose it soon enough if they don't. In macroëconomics, the distribution of income doesn't matter, because aggregate supply and demand are aggregate supply and demand, and, if their is a maldistribution, it will show up as a drop in aggregate demand, a decrease in aggregate supply, at which point either production will drop, as demand drops, or prices will increase, as supply decreases over demand, or, in the worst case scenario, there will be a deflationary spiral. The net of this is to a classical Keynesian, the rich being to rich is a problem that will show up in aggregate measures and the government sector can correct this by taxing, spending, borrowing, or some combination of the above. Money, in macroëconomics, doesn't matter.
My gut tells me to persevere, Stirling Newberry can ring so true, when I do understand, that is...
more below
But what if it does? And what if, as is happening now, the wealthy can keep themselves busy and isolated from everyone else, and produce enough churn to create the illusion of an expanding economy? Why then you can get a situation where the macroëconomic indicators are sufficiently stable not to call for government intervention - or worse to call for bad government intervention, like mailing partial rebates on the inflation tax, or large war spending bills - and exacerbate, rather than ameliorate the effects. Now what is happening in open economy macroëconomics is that the economy is shifting from producing non-tradables like houses, to producing tradables at rates the global economy will pay for. Exports are where the effort is going to go. A rule of thumb from studying the neo-liberalization of other economies - developing economies, because effectively the US is becoming a developing economy - is that it costs 1% of GDP to convert 1% of GDP. Since this is often converting 1% of GDP from internal consumption to exports, and 1% of cost comes out of internal GDP as well, this means that the lower half of the economy takes a 4% hit - 2% doubled, since they are half of the economy - each year of conversion, and only sees an improvement when the exports start improving standards of living. So this generally means a 4% hit, a 2% hit, but that piles up for the entire conversion period, which is often 4-10 years (I'm looking here at Boliva, Columbia, Ecuador, Argentina, Indonesia, Vietnam, China and Russia as examples. If someone wants to pay for a year of my life to produce the doorstop statistic survey, I'm game.) Which is why neo-liberalization is generally unpopular with domestic populations. Worse if they get Thatcherized, and they see only about half of the benefits of exports, because foreign investors are taking half. To summarize this, what Bill Clinton did to Russia and Argentina, Bush is doing to America. "And it's worked out pretty well so far." To quote the tag line from Iron Man. Open your eyes, the solution is not laborite socialism, nor a return to a slightly less nasty version, but a fundamentally different road.
I bet some here will be able to explain this using apples and oranges, sigh...
Duh
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