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Dow hits new record of 13000, as US & world economies continue to grow

by wchurchill Sat Apr 28th, 2007 at 04:37:47 AM EST

A new high on the Dow Jones Index reminds us that economic growth continues in the US, and around the world.  IMO there exists a bias amongst us here at ET, a bias leads to continuing predictions that the world economies, and in particular the US economy, is about to fall apart.  My first diary at ET, October 15, 2005, Significant growth over the next 5 years was written to argue against scenarios that were being presented at ET, that argued that growth in the US and the world as a whole would be negative.  I argued against that view, and argued that the world economies would in fact grow nicely.

It's likely that all economies can benefit from this growth.  The US is best positioned in healthcare and technology, and should benefit significantly, and has been showing good growth the last several years.  Asian growth will likely be the most explosive, due to their tremendous potential growth as a result of an underutilized population.  Europe should certainly benefit, but growth numbers over the past several years place them third behind the US and Asia.  European employees and industries may have to be flexible as Asia challenges entrenched European business positions.  IMO, heavier percentage allocations to the US and Asia in terms of funds invested, may lead to better overall returns.
Not to pick on the ever gracious Jerome, but he did argue at that time for a no growth scenario, and even back then highlighted the housing market.
thanks for making a decent and argued case for bullishness.
I voted "no growth", but if you want a really pessismistic outlook dissinulated under savvy investment advice, have a look at:
http://www.hoisingtonmgt.com/HIM2005Q3_NP.pdf

I don't know them, but the kossack that pointed me to this doc+. wrote that they had an exceptional macro track record in the past. They are basically saying that interest rates will not increase because the recession will come before inflation makes it necessary.

So much for the kossack, as there has been no recession over the last 18 months and of course interest rates did continue to climb.  However I imagine this "investment advice" column is continuing to be published and collecting fees from investors.

The Dow was 10287 when I wrote that diary on Oct 15, 2005.  Almost a year later, Oct 7, 2006 I wrote a follow up diary as the Dow approached 12000, Dow Jones sets new all time high last week.  Clearly the achievement of 12000 showed that the economy had not nose dived as predicted by Jerome and others.  But, the economy was expected to slow from the rapid growth that it was one, as shown by the following comment:

-The American economy is slowing down this quarter, and likely next.  That was necessary as inflation had been edging up, and the Fed responded with 17 straight interest rate hikes.  There is some concern that they overdid it,,,,continuing with a couple of hike even after seeing data of the slowing economy.  But concensus view seems to be there will be a soft landing, not a recession, and then return to strong growth.  Good news for Europe and the world economy as well.

We should note that the economy has in fact slowed in the US, as predicted, in the 4th and 1rst quarter of '07--slowed, but to 1.3%, not negative, growth.  We should note that the 13000 Dow shows an increase of 26.4% over the Dow of October 15, 2005-clearly different than the negative growth predictions of some.  We should note that while I had projected that the major stock markets would all grow (US, Europe, and Asia-non Japan) that was in fact true, but while I predicted the order would be Asia, US, Europe,,,,the order has actually been Asia, Europe, US.  We should further acknowledge that stock markets don't necessarily reflect the results of various economies around the world, but each of these economies grew nicely--with the order of growth being Asia-non-Japan, US, and Europe.

It's also worth noting that less developed economies have benefited dramatically over the last few decades, and that millions around the world are being pulled out of poverty.  This was shown in a dramatic and very exciting manner by DEBUNKING MYTHS ABOUT THE THIRD WORLD-Hans Roslong in a very exciting presentation.

I certainly do not believe that one should plan one's life entirely around our financial rewards.  satisfaction in fact comes from more spiritually and family grounded pursuits, imo.  Yet meeting the basic economic needs of life is helpful for most of us.  so I would just point out that on that economic dimension, those of us who have planned their lives around positive economic growth (as opposed to no growth) have done much better over the last several years, and acutally the last century, than those who have based their financial planning on the "no growth", "doom and gloom" scenarios that we sometimes see.


Display:
Here's another look at it, which compares the Dow to things that have real value...

Mike Maloney:  The Dow is crashing

(Of course, the guy is in the business of selling gold and silver, so take that into account)

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sat Apr 28th, 2007 at 05:00:30 AM EST
It appears to me that being:
(a) "short" of Fed Dollar "claims over Value"; and
(b) "long" of "Value" - producing assets isn't going to be a bad strategy these next few years.

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Sat Apr 28th, 2007 at 05:26:00 AM EST
[ Parent ]
isn't it a great thing about free markets.  you can make that bet, and if your insight is better than the market, you can make a fortune.  good luck.
by wchurchill on Sat Apr 28th, 2007 at 05:31:41 AM EST
[ Parent ]
Oil isn't priced in Dollars: Dollars are priced in Oil.

Heads Oil wins: Tails the Dollar loses.

Unfortunately it's the entire planet that has become the stake in the Dollar vs Liquid Fuels wager.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat Apr 28th, 2007 at 06:40:25 AM EST
[ Parent ]
Would you be willing to write a diary on the Simon-Ehrlich wager?

Bush is a symptom, not the disease.
by Migeru (migeru at eurotrib dot com) on Sat Apr 28th, 2007 at 05:37:29 AM EST
[ Parent ]
and as you say
(Of course, the guy is in the business of selling gold and silver, so take that into account)
.

the dow in terms of computer chips has exploded.

but the dow in terms of uranium is horrible.

of course the euro in terms of uranium is horrible, and gold in terms of uranium is horrible, and crude oil in terms of uranium is horrible.

the real measure of the Dow, or the Nasdaq, or the S&P 500 is not in oil or in uranium, it's in dollars.  just like the real measure of the EU exchanges is in euros.

what you say is clever but obfuscating.

by wchurchill on Sat Apr 28th, 2007 at 05:28:22 AM EST
[ Parent ]
The Dow in euro is what will get people from Europe, it is the only relevant measure for them.

Please explain to me how can this be obfuscating on European Tribune?

I'm curious, thanks!

Over the last ten years (apr1997-apr2007), european buying in STOXX50E got slightly better euro returns than if they invested in NASDAQ (2.0x vs 1.9x). I did not try wider indexes.

by Laurent GUERBY on Sat Apr 28th, 2007 at 06:11:11 AM EST
[ Parent ]
the obfuscation was aimed at valuing one's income and assets in gold and oil.  I elaborated on this in a response to Migeru below.  So I agree that just as Americans on this site should value in dollars, Europeans should value in euros.  I should have made that distinction in my response to Jerome, but was caught up in the idea of valuing in gold or oil, or as Migeru's reference discusses, cans of soup and pasta.
by wchurchill on Sat Apr 28th, 2007 at 12:49:37 PM EST
[ Parent ]
If we suppose that a US government sees its task to demonstrate strength in economy by stimulatig Dow value (in dollars), wouldn't be the easiest way to achieve that to take steps (blown up deficit spending and such) that depriciate dollar?

I think that Bush's administration did a lot (if not everything) to increase "demand" for speculative stocks and decrease demand for dollar. Oh yeah, that's what they are preaching - supply-side economy, push all the money into stocks.

by das monde on Sat Apr 28th, 2007 at 06:14:41 AM EST
[ Parent ]
The Dow [I suppose we're talking the http://en.wikipedia.org/wiki/Dow_Jones_Industrial_Average">Industrial Average here] doesn't represent "speculative stocks" but big industrial ones. Intel is the only component of the Average that's listed on NASDAQ (the more speculative of the big markets), the rest are on NYSE.

Bush is a symptom, not the disease.
by Migeru (migeru at eurotrib dot com) on Sat Apr 28th, 2007 at 06:54:23 AM EST
[ Parent ]
correct.  and actually I don't use the Dow in benchmarking my personal investments.  I used broader indices such as the S&P 500, the US total market indices, the Morgan and Stanley set of international indices.  I use the Dow here and in other broader discussion formats because it is a number that is more widely known, and it tracks the other broader US indices reasonably well.
by wchurchill on Sat Apr 28th, 2007 at 12:59:35 PM EST
[ Parent ]
No, Microsoft is, as well.  That's to be expected, given the importance and  dominance of Intel and Microsoft.  NASDAQ is typically associated with tech stocks, although HP, IBM and Verizon are all on the Dow and the NYSE.

The Dow is, as you say, less speculative.  It's essentially the big dogs in American business.  If you want to know where America is headed, though, the S&P and NASDAQ are probably the better choices, given the larger number of companies.

DJIA is where you dump your money when you want to play a conservative game, because people are always going to buy things from Wal-Mart and Johnson & Johnson.  It's more stable, whereas NASDAQ is all over the place.  NASDAQ companies are often engaged in fiercely competitive markets and can get tossed around like it's nobody's business.  Intel and AMD come to mind.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Sun Apr 29th, 2007 at 09:22:12 PM EST
[ Parent ]
The Financial Sense guys have a known bias (they are gold nuts, for many of them, and thus anti-inflation ultra-hawks), and I flagged this, but they do have a point that the real returns on the Dow have been pretty mediocre in this decade, even when expressed in dollars.

Expressing the Dow in euros is a lot more relevant to us here in Europe - and definitely legitimate and meaningful in terms of "value". The fact that the dollar has lost 40% of its value against the euro over the period has to mean something, right?

I mean, market cannot be that wrong?

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sat Apr 28th, 2007 at 06:15:57 AM EST
[ Parent ]
yes I agree with your comments on the euro, and won't elaborate here, because I already have to Migeru and Laurent.  In my own mind I was commenting on gold and oil from your comment, and really should have excluded the euro.

you can cherry pick dates to prove anything you want on returns on the American stock markets, since stock markets have cycles, though the long term trend is up.  The Dow was 10791 at the beginning of the decade, which was Jan 2, 2001, so it is 21.6% higher today, six years later, and that is definitely lower than the longer term growth figures.  If you chose January 2000 the returns would be far less.  If you chose 1995 they would be far better.  The long term returns from US equities are about 10% nominal and 7% real.

 But the US economy is incredibly strong in recent times.  There has been one very minor recession since 1991, which is an incredible period of prosperity, particularly thinking of the challenges of the tech wreck, 9/11, a poorly chosen and poorly run war in Iraq,,,,just to pick a few.

by wchurchill on Sat Apr 28th, 2007 at 01:20:07 PM EST
[ Parent ]
You're supposed to be able to express the price of anything in terms of the price of anything else, and the "natural" value unit should be related to your assets/income and your expenses. So pricing things in oil, or in Euros, makes sense depending on who you are, where you are and what you do.

Bush is a symptom, not the disease.
by Migeru (migeru at eurotrib dot com) on Sat Apr 28th, 2007 at 06:51:00 AM EST
[ Parent ]
the "natural" value unit should be related to your assets/income and your expenses. So pricing things in oil, or in Euros, makes sense depending on who you are, where you are and what you do.
 I think this is very well said Migeru, with the exception of pricing in oil.  IMO, an American who plans to live primarily in the US should therefore value his earnings and investments in dollars.  s/he should diversify investments around the world, with a good percentage in Europe and Asia, so he can take advantage of those growing economies, as well as any dollar weakening such as we have experienced in the last six years.  (though of course the worm turns, and a strengthening dollar will have the revrese effect.)  but inflation is low in the US, relative purchasing power is extremely high, and your standard of living is very much tied to those aspects of the currency.  and conversely a european should manage in euro's, with imho similar worldwide diversification.

but managing in oil or in gold does not make sense to me, nor does managing your affairs in cans of soup or pasta, as your referenced article points out.

by wchurchill on Sat Apr 28th, 2007 at 12:38:16 PM EST
[ Parent ]
has real value.  A week's wage for a lump of metal the size of a quarter?  I know gold has some nice properties, but is it 50X more valuable than silver in "real"  applications?

I've yet to meet a gold bug that wasn't a little bit cracked.

by HiD on Sat Apr 28th, 2007 at 06:28:19 AM EST
[ Parent ]
It may not have Value, but it does have Price.

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Sat Apr 28th, 2007 at 06:41:49 AM EST
[ Parent ]
tulip bulbs were traded for houses too at one stage.  Though I admit gold has been a bit more resilient over the ages.
by HiD on Sat Apr 28th, 2007 at 07:33:56 AM EST
[ Parent ]
You can have inflation with gold too, as the Spanish found when they looted Central America and flooded the market with newly minted gold money.

It's all relative.

Now, I take the view that Money is "Dynamic Value" and exists only in the transitory moment of Value Exchange by reference to a "Value Unit" (Mig's Numeraire).

Capital, on the other hand (underpinned by the "Property" relationship) is "Static Value" or "Potential Money".

IMHO "Value" is a direct analogy for "Energy" , and that Economics could be thought of as the "Physics of Value".

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat Apr 28th, 2007 at 08:00:05 AM EST
[ Parent ]
I tend to think that gold is pretty useless, too which, by the way, makes it a good base for money because people did not use to take their gold coins and go do something with the gold instead. In a sense, gold is as good for fiat money as nickel. But, how is Gold useful>

Wikipedia: Applications of Gold

Some gold salts do have anti-inflammatory properties and are used as pharmaceuticals in the treatment of arthritis and other similar conditions. However, only salts and radioisotopes of gold are of pharmacological value, as elemental (metallic) gold is inert to all chemicals it encounters inside the body.

Gold solder is used for joining the components of gold jewellery by high-temperature hard soldering or brazing.

Dentistry: ... The gold alloys' slight malleability facilitates the creation of a superior molar mating surface with other teeth and produces results that are generally more satisfactory than those produced by the creation of porcelain crowns.

In photography, Gold toners are used to shift the colour of silver bromide black and white prints towards brown or blue tones, or to increase their stability.

Gold is highly conductive to electricity, and has been used for electrical wiring in some high energy applications (silver is even more conductive per volume, but gold has the advantage of corrosion resistance). ... Though gold is attacked by free chlorine, its good conductivity and general resistance to oxidation and corrosion in other environments (including resistance to non-chlorinated acids) has led to its widespread industrial use in the electronic era as a thin layer coating electrical connectors of all kinds, thereby ensuring good connection. ... Besides sliding electrical contacts, gold is also used in electrical contacts because of its resistance to corrosion, electrical conductivity, ductility and lack of toxicity.

Colloidal gold is used in research applications in medicine, biology and materials science.

Gold, or alloys of gold and palladium, are applied as conductive coating to biological specimens and other non-conducting materials such as plastics and glass to be viewed in a scanning electron microscope.

Gold is used as the reflective layer on some high-end CDs.

The isotope gold-198, (half-life: 2.7 days) is used in some cancer treatments and for treating other diseases.

Silver has a similar list of applications. Transition metals are not readily replaceable for their specific aplications.

But, yeah, the "Gold standard" is a throwback to a time when wealth was flaunted by wearing and using gold.

Bush is a symptom, not the disease.

by Migeru (migeru at eurotrib dot com) on Sat Apr 28th, 2007 at 07:10:50 AM EST
[ Parent ]
one of the largest demand side inputs to gold price is demand for India where jewelry is used as store of wealth.

wonder how that would turn out if a real alchemist turns up?

by HiD on Sat Apr 28th, 2007 at 07:35:39 AM EST
[ Parent ]
Hey, wc:

Bloomberg: U.S. Economy: Growth Slows to Least in Four Years (By Joe Richter on April 27, 2007)

The U.S. economy grew last quarter at the slowest pace in four years because of the housing slump and a bigger trade deficit, leaving consumer spending to keep the expansion alive.
How long can consumer spending keep the economy going? It's been over 5 years since Bush's "keep shopping" after 9/11.

Bush is a symptom, not the disease.
by Migeru (migeru at eurotrib dot com) on Sat Apr 28th, 2007 at 05:43:16 AM EST
I've always wondered why the indicator GDP minus total debt increase was not the one that's used to measure current economy trend. There's a small part of short term future in GDP (inventories) but it's not at all the same horizon than most debt.

USA household debt is 50 GDP points higher in the USA than in France, and debt seems to be growing more than two times faster than the economy in the USA since 1990 :

http://mwhodges.home.att.net/nat-debt/debt-nat.htm

by Laurent GUERBY on Sat Apr 28th, 2007 at 06:18:51 AM EST
[ Parent ]
I've bookmarked your reference and will have to go back and review it sometime.  I'm somewhat reluctant because every time I've done this in the past it has simply been an exercise in finding logic flaws or misinterpredtation of the data on the part of the author--and a waste of time for me.

For example, go here to see the International Debt Thermometer (page down once to see the 2nd graphic) and you'll see that the US debt is slightly below France and Germany is a % of GDP.  As to adding to national debt, the US normally stays easily under the EU guideline of 3%.  So if you want to criticize this aspect of the US debt, you need to start with Germany and France first.  and I just don't think any of these three have a problem, as long as they stay within that 3% guideline going forward.

IMO the issue for those countries and others is having large unfunded pension programs and healthcare costs with an ever increasing age of the population.  but no politician in any country is going to address this until it's a real crisis--and hey, why not kick the can down the road and let someone else handle it,,,,huh?  To their credit, both Clinton and Bush made efforts to get this on the national agenda in the US, but those weak kneed nuts in Congress would rather impeach a president, try to run the war, hold congressional hearings to get their mugs on TV, etc.  Even here at ET it's just an issue that people are bored with, or as Jerome says, we've always been able to tweak a few things and fix it in the past.  Oh well.  I have tried to get attention on this for years, but have failed--I'm a small drop in the ocean after all.  The thing I can do is prepare my family for what's going to happen, and I'm doing that.  Sorry about those that don't get prepared--but none of them can say they were not warned.  Even some politicians have tried.  (If you can't save the world, you can at least prepare yourself and your family to the best extent possible.)

by wchurchill on Sat Apr 28th, 2007 at 02:30:13 PM EST
[ Parent ]
Not that's I'm not talking about government debt alone here (it's not clear from your answer that we're talking about the same thing).

I'm talking of total debt taken by all agents of the economy: governement but also households and business.

As GDP is the sum of government spending and other actor contributions, I don't think that government debt alone is pertinent when talking about GDP.

As of Q2 2006, total debt in the USA is 208% of GDP, in France it's 168%, so the total debt differential 40% of GDP, not a small number.

For sources see links here:

http://guerby.org/blog/index.php/2006/11/02/123-les-dettes

Note 1: I'm not including financial institution debt (column of the Fed Z1 flow of funds report and something similar from European central banks) because I don't know if it's meaningful to add them, I suspect yes but nobody has been able to answer my doubts yet.

Note 2: I don't think the data source I cited is that credible, but it seems to be based on Fed Z1 report (which is credible :).

by Laurent GUERBY on Sun Apr 29th, 2007 at 10:17:39 AM EST
[ Parent ]
Note 1: I'm not including financial institution debt (column of the Fed Z1 flow of funds report and something similar from European central banks) because I don't know if it's meaningful to add them, I suspect yes but nobody has been able to answer my doubts yet.

Can you explain your doubts?

Bush is a symptom, not the disease.

by Migeru (migeru at eurotrib dot com) on Sun Apr 29th, 2007 at 10:20:28 AM EST
[ Parent ]
Well, I'd like to be sure that when a business or individual borrows X from a financial institution the X does not pop up in both columns. Banque de France does  report financial institution debt and other debt in separate papers, and in particular "endettement interieur total" does not seem to include financial debt (the source of my small doubt).

If you know someone proficient in central bank reports, I'd be very happy to know the answer there.

by Laurent GUERBY on Sun Apr 29th, 2007 at 10:26:32 AM EST
[ Parent ]
Which two culumns? GDP and Debt?

Bush is a symptom, not the disease.
by Migeru (migeru at eurotrib dot com) on Sun Apr 29th, 2007 at 10:27:40 AM EST
[ Parent ]
No the "two" columns are "households, non financial institutions and business" debt and "financial institution debt".

I'm talking about debt accounting only here.

by Laurent GUERBY on Sun Apr 29th, 2007 at 10:29:51 AM EST
[ Parent ]
I thought abut that, but how can the debt appear on the "financial institutions" column? It's an asset, nt a liability, on their balance sheets.

Bush is a symptom, not the disease.
by Migeru (migeru at eurotrib dot com) on Sun Apr 29th, 2007 at 10:32:59 AM EST
[ Parent ]
Private banks can borrow money from other private banks and central banks I assume, in that aspect they're not different from regular business.
by Laurent GUERBY on Sun Apr 29th, 2007 at 10:45:31 AM EST
[ Parent ]
Now, here are two people - both of well above average intellect, and both well-versed in matters financial - who are scratching their heads in relation to the structure of national accounts ie their debits and credits.

Which just goes to show what utter and complete bollocks it all is.

Smoke and mirrors screening the totally unacceptable and unsustainable Reality of a deficit-based monetary system..

Consider UK Plc: it's the only Plc with no "Equity" on the balance sheet, and with accounts which show a debt, but not the assets they are secured against.

It's as though Mig's family accounts showed the mortgage, but not the house!

Instead, we see UK Plc's "assets" consisting largely of bank-issued claims over houses - over 70% of UK money supply.

Un-effing-believable. In every sense.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sun Apr 29th, 2007 at 01:14:10 PM EST
[ Parent ]
Consider UK Plc: it's the only Plc with no "Equity" on the balance sheet, and with accounts which show a debt, but not the assets they are secured against.

As the risk of government default is almost by definition [or in theory] negligible, government debt doesn't need to be secured, does it?

Bush is a symptom, not the disease.

by Migeru (migeru at eurotrib dot com) on Sun Apr 29th, 2007 at 05:21:27 PM EST
[ Parent ]
Governement debt is by definition secured against the whole country - that's why, with the sole exception of Gasprom, no company has a higher rating that the country it resides in.

Of course, there is then the issue of government being acually willing to reimburse its creditors, which affect the state rating.

Un roi sans divertissement est un homme plein de misères

by linca (antonin POINT lucas AROBASE gmail.com) on Sun Apr 29th, 2007 at 07:53:17 PM EST
[ Parent ]
Corporate debt is always less secure than a government's, because governments have the power to forbid companies in their country to pay their debts - both to external creditors (as the multiple debt crises and convertibility/transferability restrictions have shown) or even to internal creditors (the major innovation of the Russian moratorium in 1998.

Gazprom had a better rating than Russia when it was using its gas export contracts as collateral, because the only way it could default on that debt was to stop delivering gas, a much more violent step nowadays, diplomatically, than just defaulting on payments.

That's why we were happy to lend money to Gazprom, effectively taking Gaz de France risk while being paid margins sized on Russian risk (then - Russian risk today pays very little). Ah, good ol' times...

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Mon Apr 30th, 2007 at 09:06:20 AM EST
[ Parent ]
As of Q2 2006, total debt in the USA is 208% of GDP, in France it's 168%, so the total debt differential 40% of GDP, not a small number.

And according to your figures, the difference is essentially in household debt, which in the USA is 90% of GDP. Ouch.

Bush is a symptom, not the disease.

by Migeru (migeru at eurotrib dot com) on Sun Apr 29th, 2007 at 10:26:26 AM EST
[ Parent ]
Yep and household consumption is what drives USA GDP, if it's all debt increase based that's not so good.
by Laurent GUERBY on Sun Apr 29th, 2007 at 10:28:03 AM EST
[ Parent ]
Most of that is in housing, though, so it's not wholly unexpected, given the traditional 3xIncome figure on buying a house.  (It should be unusual right now, given house prices were 3.7xIncome in one of wchurchill's recent links.)  The US has always had, and continues to have, a very high rate of home ownership, so one would expect household debt to be substantially higher.  Germany's home ownership rate is about 45-50%, while the US typically comes in at 65-70%.  I believe France's rate is about 50-55%.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Sun Apr 29th, 2007 at 09:35:45 PM EST
[ Parent ]
France, the US and the UK have similar rates of ownership, in the 65-70%; Latin countries tend to have higher rates (Spain especially)

So that's not the driving factor.

The bubble is:

(that's debt to net disposable income, in various countries: US, UK, Japan on the left, Germany, France, Italy Spain on the right. Note the different scales)

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Mon Apr 30th, 2007 at 09:09:28 AM EST
[ Parent ]
I've found 55% for France, 43% for Germany, 36% for Switzerland, and 56% for Austria.  Australia is at 70%.  Britain is at 70%, as well, according to The Times.

According to the St Louis Fed, America is at about 69%.  (The figures on younger buyers -- under 35 years old -- from '95 to '04 are interesting.)  Ireland, according to the same report, comes in at a whopping 80%.

I'd be interested to know how these figures stack up against household debt.  Britain is dealing with much higher price-to-income ratios on housing than America, -- a bit under six vs a bit under four -- so, knowing that home ownership rates are roughly the same, the UK should be enduring higher household debt.  That chart seems to support it.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Mon Apr 30th, 2007 at 11:21:55 AM EST
[ Parent ]
The Irish have an attachment to owning their own land/house/home that's sort of scary, combined with historically very poor protection for renters both theoretically and in practice. The laws were/are weak and the enforcement was almost non-existent. Renting is something you do because you're too poor to buy anything.

As a result it's hard to find good rental properties, and most come fully furnished because there is/was a clause that reduced a tenants rights if the flat was furnished.

by Colman (colman at eurotrib.com) on Mon Apr 30th, 2007 at 11:30:11 AM EST
[ Parent ]
Things were improved in 2004. I don't think that measures up well to the countries that have a tradition of renting though.
by Colman (colman at eurotrib.com) on Mon Apr 30th, 2007 at 11:41:21 AM EST
[ Parent ]
There's a similar story to that among people descended from the Irish, Scots and Scots-Irish in the states.  Owning land has historically been a very big deal in my region of the country, as well as in the Midwest, and -- perhaps not surprising -- home ownership rates have been, and continue to be, significantly higher in those two regions.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Mon Apr 30th, 2007 at 01:02:04 PM EST
[ Parent ]
I did understand that you are talking about debt more broadly, though my examples were, as you point out, focused on government debt, and therefore would leave you to believe I had missed the broader point.

I guess I've just gone down this debt path before, and it's just complicated, and as I said, each time I've done it, full of errors in analysis.  As you and Migeru point out in your discussion, you need to look at offsetting debt and think about how to treat it--when bank loan to banks, or financial institutions loan to each other, one parties asset is another parties liability.

And on the business side, you need to consider what lies behind the tradeoffs of financing companies through debt or equity.  Both methods are ways of investing in business--the trade off being made is one between risk and reward.  Straight debt, fully secured, is the least risky, but also with the lowest return.  Straight common stock is the riskiest.  And there is all of those financial instruments in between--debt with warranties, a combination of debt and equity.  or preferred stock, less risk.  

There are levels of debt that are good.  Many companies should have far more debt than they have, so they can leverage their earnings--raise ROE higher than ROA.

What's wrong with homeowners having 20% of their homes owned by the bank--why not 30%, 40%, 50%.  It depends of course on the individual home owner.  There is a tax benefit in the US, for the right kind of homeowner, to have a $1 million mortgage.  But most people don't do that--even those with the credit rating.

so with my business and home ownership examples, I'm getting at the debt/equity issues.  and they are complicated.

but I understood you point.

by wchurchill on Sun Apr 29th, 2007 at 02:28:14 PM EST
[ Parent ]
I think you get a bit of a hard time on ET, wc, cos I think your heart's in the right place...

What's wrong with homeowners having 20% of their homes owned by the bank--why not 30%, 40%, 50%.  It depends of course on the individual home owner.  There is a tax benefit in the US, for the right kind of homeowner, to have a $1 million mortgage.

If only banks' DID own a proportion of the property and we actually rented that proportion at (say) 20% of the market rental.

But they don't - they create credit on the back of their Capital base and secure it with claims over our properties.

To actually own our properties wouldn't be a very effective use of their Capital would it, not when they can use their Capital as a base for credit creation which allows them to finance a dozen houses for every one they could actually buy by investing their equity in property.

Banks could easily reinvent themselves so that they actually bring together investors in property with investments in property. That way they wouldn't need to put a penny of Capital at risk, as they currently do in the mad world of fractional reserve banking...

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sun Apr 29th, 2007 at 03:00:57 PM EST
[ Parent ]
Partial equity schemes which combine rent and a mortgage share are available in the UK, but not very popular, and mostly offered by the firms that build estates as a way to get people into those estates. They're certainly not a standard fixture on the bank-run mortgage circuit.

I'd have to look into how the numbers work out, but most people seem to buy with a view to owning outright some time close - or ideally before - retirement. So when income drops, outgoings drop too, and they're left with a substantial pile of equity.

You might think that younger buyers would be interested in building up a transferable deposit with a combined buy/rent scheme, but it doesn't seem to work like that. I'm not sure why, because when property prices are exploding a part-share of equity is better than no share at all through renting, and potentially a reasonable investment.

My guess is the banks don't like the scheme because effectively they're forced into property price speculation. Normally it's the mortgage owner who takes all of the risk, and - obviously - even when equity is negative the owner is still responsible for the full amount of the loan.

So if banks co-owned property, a price crash would wipe maybe 10-20% off the nominal book value of the holdings.

But - when prices crash, mortgage defaults lose a similar amount from mortgage loans anyway. So the objection doesn't really make sense. And when prices are increasing, banks are missing out on a huge potential source of income.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Apr 30th, 2007 at 05:32:55 PM EST
[ Parent ]
My guess is the banks don't like the scheme because effectively they're forced into property price speculation. Normally it's the mortgage owner who takes all of the risk, and - obviously - even when equity is negative the owner is still responsible for the full amount of the loan.
My guess is that this is true,
But - when prices crash, mortgage defaults lose a similar amount from mortgage loans anyway. So the objection doesn't really make sense. And when prices are increasing, banks are missing out on a huge potential source of income.
and that this is less true.  I know banks don't like defaults--they don't want to own the house.  but I imagine their default ratios are easily covered in their interest rates, or there wouldn't be a lot of banks around.  and they get a fair amount back on the default anyway--a 20% loan, one year later the property is down 10%, the owner loses everything if he can't weather things and has to default--but the property may be sold for 70, 80, 90%?  
by wchurchill on Mon Apr 30th, 2007 at 06:48:39 PM EST
[ Parent ]
thank you for the kind comment.

your idea is not a bad one at all.  but I imagine the banks don't want to do it because they think they already have a good business model.  

but you would think if the idea is a good one, some other entrepreneurs would have gotten into this and made a good business out of it, and they have not, that I know of.  Though I note ThatBritGuy says this is an option in the UK, but it has evidently not been to popular.

one problem I could see is that a shared equity arrangement is really a true partnership.  what happens if the owner partner doesn't take care of the house--let's it run down?  If he is a wonderful owner and fixes it up himself, how do you pay him for his effort?  it might be very complicated for a large corporation to run such a program.  while with a loan, it's a pretty straightforward transaction--as compared to equity ownership.

by wchurchill on Mon Apr 30th, 2007 at 06:40:47 PM EST
[ Parent ]
Chris I meant to add that this in all seriousness might be a real business opportunity.  Look at the success that micro-credit has had.  It's been incredible, as well as very heartwarming in parts of the world where it has helped the poor start their own businesses--but the entrepreneurs are also making money.

Banks obviously didn't move into this area, and perhaps they are just too closed minded, and set in their ways.  that could be the same reason they are not moving into this idea you have.

I wonder though how receptive the home buyers would be--maybe they want all of the upside, so they'll save for a house of their own, and maybe even buy a smaller one to start.

by wchurchill on Mon Apr 30th, 2007 at 06:53:01 PM EST
[ Parent ]
You are correct, wc in thinking this is a phenomenal business opportunity.

But not for property purchasers, who, as you identify would not wish to share the gains they are accustomed to see as inevitable - the fact that these gains are caused by deficit-based money does not concern them, and why should it?

However, the possibility is nevertheless there for a purchaser to acquire property using this mechanism. And note that the actual finance cost may be minimised since there is no reason why investment in the capital value of the land need not be treated as "Equity" (unlike buildings, land/location does not deteriorate).

ie while a return on capital will be paid by the occupier on the whole investment, there will be no need to repay much of the capital.

However, the real opportunity using this new form of finance arises at the other end of the telescope.

Equity Release.

The "Capital Partnership" is the best form of Equity Release there is, and wipes the floor with the existing toxic alternatives of:

(a) "reversion" (when you sell part or all of your property to an investor who gambles on how long you live); or
(b) a "roll-up mortgage" - where the interest rolls up - typically at 2% over base rate.

So Aunt Agatha sells (say) 10% of her £500k house to her pension fund, or someone else's, and simply pays 10% of the market rental of the property for as long as she uses the capital.

If she doesn't want to pay cash, she can pay in further equity shares instead.

Like all Equity release schemes, the equity will likely run out one day, but this structure gives :
(a) Aunt Agatha the best deal there is;
(b) Pension Funds a simple new REIT look-alike investment (since LLP and LLC vehicles are tax transparent or "pass through").

To see the extent of the opportunity, in the UK over £1 trillion in property is owned by over 65's free of mortgage.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Mon Apr 30th, 2007 at 07:34:55 PM EST
[ Parent ]
Thanks for your detailed comment.

As far as I understand there is no monetary creation with equity whereas there is monetary creation for "classical" household or business loan, and I believe that's the criteria for defining debt in the central bank reports we're looking at (after all money creation is what central bank are supposed to regulate :).

Monetary creation is a factor for the value of the dollar hence the value of US assets.

For home ownership, the right number is of course total equity of the "owner" of the house. Owners with little chance of paying back their loans are counted in the "owner" share of the population without ponderation otherwise. I haven't seen international data with total equity.

Also in France there is very limited borrowing against your current home value (it's legally possible but rarely used up to now at least) so the impact on GDP via consumption is lower than in the USA.

by Laurent GUERBY on Mon Apr 30th, 2007 at 06:42:16 AM EST
[ Parent ]
Good comments Laurent, thanks.  I am pretty sure that you are correct regarding the "classical household and business loan", as I think you are postulating the business loan as a bank loan.  

For public companies in the US, most of their loans are in the form of bonds, that are traded on the public markets.  the bonds are held by various types of investors.  while the bonds are put on the market by investment banks, this is a different process.  So if I understand this right, you do not get the multiplier effect, and the money creation impact on these types of borrowings.  (I guess individual bondholders could decide to borrow on margin--though actually I'm not sure if bonds are considered marginable, like stocks--but even then, margin requirements are much tighter than bank reserve requirements.)  

I'm interested in your comments.  I haven't thought about this element of borrowing--margin versus bank reserve requirements--in a long time, maybe never.  I'm learning. -:)

by wchurchill on Mon Apr 30th, 2007 at 11:46:51 AM EST
[ Parent ]
Yes I believe issue of equity and bonds (and convertible bonds, credit default stuff, derivatives of all sort, etc...) do not imply monetary creation at all.

To be honest, I don't understand enough of the USA mortgage repackaging business to know what share of household debt ends up in the form of bonds vs classical bank loans. I even wonder if someone knows :).

by Laurent GUERBY on Mon Apr 30th, 2007 at 02:10:20 PM EST
[ Parent ]
that is a great point, and a great question.  I need to think about that.   I think you are implying that maybe this would put this outside the multiplier effect?  hmmm, more learning and thinking.
by wchurchill on Mon Apr 30th, 2007 at 02:31:11 PM EST
[ Parent ]
My reasoning is:

  • the bank makes loans to a households and so creates money against paper promise (total quantity subject to fractional reserve requirements set by the Fed in the USA)
  • then the bank writes a legal document packaging loans and sells this paper to other entities for some amount of USD which it receives on its book cancelling more or less exactly the loans total amount.
  • in the end there is no or little money creation, the bank has just been an intermediate between household and other entities.

There has been (too for me :) detailed reports on the USA mortgage market on the following blog you might want to go through it:

http://calculatedrisk.blogspot.com/

An articles in the ubernerd serie:

http://calculatedrisk.blogspot.com/2007/04/mbs-for-ubernerds-i-gse-pass-throughs.html

Polical moves around bondholders liabilities:

http://calculatedrisk.blogspot.com/2007/04/bagholder-bondholder-liability-cant.html

by Laurent GUERBY on Mon Apr 30th, 2007 at 06:05:03 PM EST
[ Parent ]
The way I understand it, upon sale of the loans:

(a) the asset of the portfolio of household loans is replaced in the Bank's books by the asset of an interest-free loan from the Central Bank aka cash, to be immediately put on interest-bearing deposit (ie other banks and the Central Bank replace the householders as debtors to the Bank);

(b) the equal and opposite liability the Bank had to depositors/the banking system remains exactly as it was.

The original loans, and therefore the original Money, remain in existence, although the counterparty has changed. It is only when loans are paid off, or written off, that the original money created is cancelled or "destroyed".

I do not see how "static" money "tied up" in land and property - while it may have inflated asset prices when it came into being - can possibly cause retail price inflation.

It is not clear to a Bear of Little Economic Brain like me that monetarists have ever distinguished adequately between "asset-backed" (ie secured) credit/Money, which is for the most part "static" and unsecured credit/Money - which is free to circulate ie "dynamic" - and hence may potentially cause inflation.

As far as I know the vast bulk of Money created (>70% in the UK) is mortgage-backed and may be characterised as "static", therefore. Similarly any other secured loans, and any money invested in shares of limited companies may equally be characterised as "static" and IMHO for the most part (the exception being when Equity Release takes place upon the creation of the loan) non-inflationary.

As far as I can see, monetarism bears very little relation to Reality. ie in technical terms, it's almost complete bollocks.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Mon Apr 30th, 2007 at 07:14:44 PM EST
[ Parent ]
I think you are right Laurent.  I almost have a headache from grinding through this--there are very old brain cells back there somewhere, probably labeled "macroeconomics" and "money and banking".  but they are very unused cells as my life moved from that macro area into day to day business operations (which includes lots of microeconomics, accounting, and all of the other stuff, marketing, etc--but very little macroeconomics), and now more into investing--which has a little more macro, but not all that much.  so I feel those macroecon cells crying out in pain.

But I think all that has happened is a bank has sold a portfolio of mortgages and therefore gets some extra cash in place of the paper.  But (in the perfect world of theoretical economics) that cash is drawn out of other banks.  So cash reserves in the system are net zero.  

The real economic consequence of the transaction is it moves the risks of the mortgage portfolio, and of course the rewards of the mortgage/interest payments, from the bank and into the hands of investors--individuals like you and I, pension funds, etc.  

Thanks for discussing this.  and thanks for the links, I'll peruse them as soon as my head stops hurting. -:)

by wchurchill on Mon Apr 30th, 2007 at 08:25:37 PM EST
[ Parent ]
As I read Laurent, what he is saying is that while the original loans may have created new Money, this is essentially then "repaid" when the Bank sells the loans on. ie no new "net" Money.

That is not the case.

I am saying (and you are agreeing) that once the loans = Money are created then while selling them on may change the counterparty of the loan, the "new" "asset-backed" Money created in the first place remains in existence.

As I said earlier, it just goes to show how obscure the system is, and how its fundamental flaws are entirely hidden from view behind smoke and mirrors..

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Tue May 1st, 2007 at 03:02:34 AM EST
[ Parent ]
Yes, after a good night sleep I tend to agree that my analysis is wrong and that money is created even if there is repackaging.

The household got the created loan money and this amount won't go away in existence and in the bank book until repayment of the loan.

by Laurent GUERBY on Tue May 1st, 2007 at 05:25:17 AM EST
[ Parent ]
I now believe I was wrong, more headache :).

One thing is that the bank having repackaged might be able to do more loans because some regulatory limit is lowered by the lowered (or cancelled) risk of the bank.

by Laurent GUERBY on Tue May 1st, 2007 at 05:32:16 AM EST
[ Parent ]
That is of course the whole point.

The Bank frees up its regulatory capital.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Tue May 1st, 2007 at 06:07:47 AM EST
[ Parent ]
Fractional reserve multiplier, baby.

In fact, couldn't the bank just loan the money back to Metrovacesa?

Bush is a symptom, not the disease.

by Migeru (migeru at eurotrib dot com) on Tue May 1st, 2007 at 06:44:37 AM EST
[ Parent ]
Oh no!  <coffee not yet percolated, great night sleep, "macroecon" brain cells stirring>
Initial thought is I still think you were right--but very much open to discussing and learning.
I follow what you and Chris are saying on the first point. The bank A, let's say, packages its loan portfolio, and sells it.  So this transaction effects the asset side of its balance sheet--its bond portfolio account goes down, by let's say $1 million, and its cash account goes up by a million.  (Let's assume it's a break even transaction, no gain no loss, so we can stay away from tracking through the P&L.  And I agree that Bank A therefore has $1 million more cash, and that is available to the money multiplier to raise the level of the money supply.

However, that million of cash came from many sources, but (perfect world of economics thinking) wouldn't it come out of other banks in the system.  Banks C, D, and E for example might have the three of us as customers, and we bought the bonds, paying for them from our bank accounts.  And as we do so, banks C, D and E have a negative money multiplier that offsets the positve one of bank A.

However, that does leave us with the $1 million of bonds in our hands.  But of course we are not banks.  So it's a different process from here for us.  For example I would likely have my $300,000 of the bonds in a brokerage account.  I would have probably sold something, bonds or stocks, to pay for the bonds.  So my financial assets are somewhat the same, with a slightly different mix of assets.  Investors like me, us, can buy on margin, but I'm fairly risk adverse and my borrowings are normally below 5% of financial assets--never above 10%.  and this new mortgage bond wouldn't change my thinking about risk levels.  (and also I'm not sure that changes the money supply anyway--I'd have to brain crunch through the whole margin process to figure that impact.  But let's ignore that for the moment.

Where does this original concept of Laurent's thinking break down?  a $1 million positive impact at Bank A and the resulting positve multiplier effect, perfectly offset by $1million negative impact in banks C, D and E.

PS:  I don't know if we want to go there, but WSJ had an interesting article that relates to the "margining" process I guess I'm suggesting that we put aside for the moment: OUTER LIMITS
As Funds Leverage Up,
Fears of Reckoning Rise
Fed and SEC Question
Wall Street on Policies;
'A Mockery' of Margin
By RANDALL SMITH and SUSAN PULLIAM
April 30, 2007;

Hedge-fund manager John Paulson made $1 billion using a complex financial instrument to pump up a bet that the subprime-mortgage market would crater. The parent company of retail giant Sears made $74 million using a similar device to boost its wager that a basket of stocks would rise in value.

Both were playing with leverage -- the magical power that allows investors to make big investments without putting big money on the table. These days, they have lots of company. Thanks to advances in financial engineering, investors have never had so many different ways to make commitments that exceed their bankrolls. And never before has leverage wormed its way into so many nooks of the financial world.

We're living on planet leverage, and regulators and market gurus are growing nervous.

How did this happen? For starters, hedge funds and leveraged-buyout funds have proliferated. They're pioneers in boosting returns using borrowed money, the most traditional form of leverage. Also, investment banks are pumping out newfangled leveraging tools such as derivatives, complex securities that allow hedge funds and other investors to add leverage without borrowing money.

Finally, mainstream America has gotten into the act. Once-conservative institutions are copying hedge-fund tactics. The Pennsylvania State Employees' Retirement System has begun dabbling in derivatives. Mutual-fund companies such as Easton Vance Corp. and Federated Investors Inc. have launched funds that rely heavily on derivatives. Garden-products maker Scotts Miracle-Gro Co. and other public companies have loaded up on debt to improve returns.

This leveraging binge has regulators and others worried. In the first place, no one knows how much leverage there is. Much of it is hidden, because investors aren't just juicing returns with borrowed money, but with derivatives, which are harder for regulators to track.

No one is sure what will happen to this complex brew in the event of a serious market downturn. When markets turn bad, leverage can create a snowball effect. Lenders and derivatives dealers demand that investors provide them with more collateral -- the stocks, cash or other assets they pledge to cover potential losses. Sometimes, investors dump stocks and bonds to raise cash. Prices drop more, losses accelerate, and more selling ensues. Some Wall Street analysts have taken to referring to a nightmare version of this scenario as "The Great Unwind."

Timothy Geithner, president of the Federal Reserve Bank of New York, said in an interview that the torrent of money flowing into hedge funds has coincided with a troubling erosion in lending practices.

The Fed, the Securities and Exchange Commission and European regulators have spent months trying to gauge the risk by gathering information from hedge funds and Wall Street firms. They've asked the brokerage firms, among other things, how much collateral they're demanding from hedge funds when they provide financing.

In my own mind, I think of the money multiplier effect of the banking system in one compartment.  Then I think of the whole world of investments, swaps, and margining as a separate compartment, since different rules outside the banking system apply--and admittedly because this is a set of rules, that is this article shows, is evolving and controversial.  Maybe this is my mistake, and you and Chris are including this aspect in your thinking, as one compartment?

by wchurchill on Tue May 1st, 2007 at 10:11:11 AM EST
[ Parent ]
There are levels of debt that are good.  Many companies should have far more debt than they have, so they can leverage their earnings--raise ROE higher than ROA.

Why is Return on Equity better than Return on Assets?

Bush is a symptom, not the disease.

by Migeru (migeru at eurotrib dot com) on Mon Apr 30th, 2007 at 07:32:52 AM EST
[ Parent ]
There's nothing equitable about Company "Equity"....

And as for "gearing" and "leverage" - it is precisely this phenomenon that is the direct cause of asset price inflation.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Mon Apr 30th, 2007 at 08:33:30 AM EST
[ Parent ]
I should have been more careful with this comment.  Thanks for raising the point.

I believe the average company in the S&P 500 is earning about 15--16% return on its assets--basically total assets minus short term liabilities like accounts payable.  and that calculation is after-tax.  I believe such a company can borrow on the markets, issue corporate bonds, with an interest rate of roughly 7%.  So the company can borrow money at 7% to finance its growth in its business, which will yield a 15% return.  But there is an additional benefit because the interest on the bond is tax deductible.  Assuming the 35% corporate tax rate, this means that the after tax interest cost is 4.55%.  So this is very favorable for the owners of the company, the stockholders--borrowing money at 4.55% and earning a 15% return on those borrowed funds.  The alternative of issuing more shares to raise the money would dilute the ownership position of current shareholders, and they would get a smaller % of the growing pie (earnings pie, I guess?).

If the company is in a reasonably stable business, I think most people would be comfortable if they borrowed up to, say, 20% of their capital structure--so the company is financed with 80% equity and 20% borrowings.  Thus the Return on Equity is higher than the Return on Assets--they are earning the 15% ROA on the total capitalization, but the bondholders are happy with 7% (which is 4.55% to the company), leaving the extra 10.45% (15%-4.55%) to be spread to the shareholders, either in dividends are share price growth.

But what I left out in my comment is that there is too much of a good thing.  If a company raises its debt/equity ratio to much, say to 50%, it can put itself into a very risky position (not unlike the subprime borrowers of today).  Stuff happens in business, and things don't always go to plan.  You're legally commited to make those bond payments.  If your earnings fall perilously close to what the interest payments are, there are covenants and you may find other people coming in to run your business and restricting your efforts to safeguard the bondholders at the expense of the shareholders--as they should, btw, bond holders are assuming they have much less risk than shareholders.

so it's better if management is prudent, and successful.  Generally company share prices will fall and remain under pressure if it lets its debt/equity ratio get too high--a "good' thing can become a bad thing, if misused, or some unforseen circumstance occurs.

by wchurchill on Mon Apr 30th, 2007 at 12:10:12 PM EST
[ Parent ]
The US economy has chugged along for hundreds of years, and taking a truely longer term view, I would say that will continue for another hundred years.

Thinking more short term, as I have commented before, I think the economy will remain very strong until 2010, driven by consumer spending which is 70% of the economy.  and demographic trends will have a negative impact at about that time.  (it could be a little earlier, like sometime in 2009 that the trends begin to hit.)  but this will not just impact the US economy, European demographics or at least as negative in the upcoming decade.  But imho, this is all the more reason that those who have believed the doom and gloom scenarios of this decade will have deep regrets--because the next decade is not going to be pretty, at least in terms of the prosperity that we have grown accustomed to.

btw, please note your Bloomberg quote is a description of something that has happened.  as i noted in my diary and earlier diaries, this slowdown was seen by many in early 2006--pretty obvious really with the Fed's raising of interest rates 17 straight times, and appropriately to keep inflation in line.  so most people, including the stock market btw, had this built into their numbers for a long time.  note Jerome's article of the last few days on the dow breaking 13000, and his puzzlement with that in light of factors in the economy.  it's not a surprise to the market, so it's already been built in.

by wchurchill on Sat Apr 28th, 2007 at 01:58:23 PM EST
[ Parent ]
I've let my pessimism about Bush's driving of our country put me off investing for waaaaay too long.  I actually check in on Bonddad's blog just to see just how much negative info can be extracted from positive data.  

We have had a serious strain of Cassandra-itis in the left blogosphere.  We don't just have "energy will be very expensive and our lives will be impacted".  We get Kunstler's "we're all going to die".  Oil isn't just peaking; instead we have the Oil Drum hyping every little thing as a signs of the great collapse.  The dollar isn't going to $1.35/euro, it's been heading for $2.00 for about 2 years now.  

by HiD on Sat Apr 28th, 2007 at 06:39:23 AM EST
here.

The US economy is only 'growing' if you're in the mythical top 1%.

For everyone else in the US, the economy is a deeply sucky thing, and has been since the Clinton/Intertoobz heyday.

The growth is really based on printing lots of money, and screwing over Chinese workers by getting items made at sweatshop prices. And for most people in the US, plenty of debt.

If you're not capable of looking beyond the superficiality of the traditional indicators, everything looks rosy.

But if you're one of those increasing numbers unable to afford medical insurance, it's not such a pretty picture.

The useful illusion of growth continues because of the wilfulness blindness of the share dealing class, whose interest in those lower down the pyramid is small to non-existent.

Wall Street is more than happy to play this out for as long as it can.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sat Apr 28th, 2007 at 07:40:35 AM EST
we both live in free countries.  if you want to believe this stuff, be my guest.  meanwhile many others take their hard earned incomes, try to live below that income level, and invest the rest in 401-k's (in America) and let them grow for 20 to 40 years. (not implying you personally don't do this--you probably do.)   the financial side of life for them is just fine, and will continue to be just fine.  

PS: Jerome published something that was trying to sell the EU as a place to invest a few weeks ago.  You might look at the average pay of US workers versus Europe in those statistics.  I don't think anyone commented on the significant difference--and we're not talking about "the mythical 1%".  and of course even though the dollar is weak, it sure buys a lot of stuff here compared to Europe.

by wchurchill on Sat Apr 28th, 2007 at 02:37:23 PM EST
[ Parent ]
I'm not interested in 'investing' if it makes people suffer. You - and millions like you - apparently have no interest in the human story behind those precious numbers of yours.

That's where we're different. Until you understand this, you will never be able to make sense of most of what's said on this site.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sat Apr 28th, 2007 at 03:52:42 PM EST
[ Parent ]
your premise is just not accurate.  investment does not make people suffer--au contraire, it provides capital needed to start new businesses, which provide new services and products that people require.  This then provides employment, and these investments are now bringing people out of poverty around the world.

As to "You - and millions like you - apparently have no interest in the human story behind those precious numbers of yours."  That is obviously an insult, and you intend it to be one.  But you don't know me, and have absolutely no basis for that statement.  If you did, you would know it couldn't be farther from the truth.  I have had direct responsibility in creating new technologies that have saved hundreds of thousands of lives, and improved the quality of life for hundreds of thousands more.

In addition, a great deal of my income in absolute terms and % terms goes to help people in need.

I don't know you, but based on your comment, I think that is probably where we are different.  I do things with my education and work ethic that help people a lot, and then do more to help people with the income that I earn.  

The growth is really based on printing lots of money, and screwing over Chinese workers by getting items made at sweatshop prices
You are stuck in some misguided ideology of what business and economics are, that seems to allow you to think you are so much better than others--my experience is that the "I'm better than you" attitude does not lead to success.  

Matthew 7:5
"First take the plank out of your own eye, and then you will see clearly to remove the speck from your brother's eye."
You'll find similar widom in other faiths, and from other philosophers.
by wchurchill on Sat Apr 28th, 2007 at 04:43:39 PM EST
[ Parent ]
Gosh, I had no idea noblesse oblige was alive and well in the US!  Y'know, I'd actually given up arguing with you -- it was making my blood pressure rise and I can't afford to have anything else go wrong with me -- but perhaps you could be my patron!  

I was thinking about writing a diary about this multi-millionaire I was chatting with in the hospital a couple weeks ago -- his wife is sick and he's afraid of going broke from her illness.  He was telling me some of the numbers and I found myself in complete accord -- he probably is going to go broke!  Anyway, it would be a pretty good diary if you'd like to invest in it.

Maybe we can eventually make language a complete impediment to understanding. -Hobbes

by Izzy (izzy at eurotrib dot com) on Sat Apr 28th, 2007 at 05:16:13 PM EST
[ Parent ]
Ouch.

Bush is a symptom, not the disease.
by Migeru (migeru at eurotrib dot com) on Sat Apr 28th, 2007 at 05:20:05 PM EST
[ Parent ]
Ouch indeed!  Admittedly the 44 million uninsured is a big problem in the US.  But that means that 354 million are insured, and a multi-millionaire is not one of those?  That must be an interesting story.

CHARITABLE GIVING RISES 5 PERCENT TO NEARLY $250 BILLION IN 2004
, from here.  Last I heard Americans give more to charities on a per capita basis than any other country.  Google to your heart's content, there are tons of links here.  and it's not just Bill Gates and Warren Buffett--it is throughout the economic classes.  

Thanks for the offer of both investment and charitable giving opportunities, but I'm pretty well set on both.

by wchurchill on Sat Apr 28th, 2007 at 06:14:38 PM EST
[ Parent ]
I resent the implication that I was questioning to charity and good-heartedness of the American people -- you won't find anyone who believes in the basic goodness of folks more than I do.  Have I not even defended you here on this very site as "not a bad sort?"  

The multi-millionaire is not uninsured.  That's one of the problems.  People are going bankrupt with insurance -- it's quite common.  The millionaire and his wife have good insurance.  If he and/or his wife had had the good sense to die 5 years ago instead of getting sick, things would've worked out well for them.  

Maybe we can eventually make language a complete impediment to understanding. -Hobbes

by Izzy (izzy at eurotrib dot com) on Sat Apr 28th, 2007 at 06:25:06 PM EST
[ Parent ]
Yeah, that would make your belief in the basic goodness of folks boundless.

Bush is a symptom, not the disease.
by Migeru (migeru at eurotrib dot com) on Sat Apr 28th, 2007 at 06:28:21 PM EST
[ Parent ]
Well, I have in past times had to depend on the kindness of strangers, which I think gives me a more, um, charitable view.

Maybe we can eventually make language a complete impediment to understanding. -Hobbes
by Izzy (izzy at eurotrib dot com) on Sat Apr 28th, 2007 at 08:00:13 PM EST
[ Parent ]
I apologize as it seems I misinterpretted your comment.  
noblesse oblige |n??bles ??bl? zh | the inferred responsibility of privileged people to act with generosity and nobility toward those less privileged
There are many reasons for charity, and I admit this is not one of the most noble ones, but I did think your note meant that.  I'm sorry I misunderstood.

On the insurance, I'm still puzzled with your comment.  I unfortunately have had very direct experience with close family members who have had cancer--very lengthy and expensive bouts.  Insurance covered basically everything.  and as you probably know, you get to know other people (in life generally, but specifically if you're spending a lot of time in treatment centers) as you go through this painful process.  and people are more open and sharing in such troubled times.  the only situation that i ran into was with a gentlemen that did not have insurance, who was stage IV and his current treatments were not working, and was wanting to try a drug that was not approved for his particular cancer.  he was working the system, and I don't know how that came out.

I just called a good friend of mine who is a hospital ceo.  he is not aware of anyone with insurance that has gone bankrupt attempting to pay for cancer treatments.  he said that there are lifetime maximums on some policies, but when you go past your max there are a number of other factors that come into play.  (our conversation became a little detailed here, so I leave that out.)  

I'm not challenging that you have run into this, just saying that I have not, in an experience that has been pretty broad.

by wchurchill on Sat Apr 28th, 2007 at 07:06:59 PM EST
[ Parent ]
I just called a good friend of mine who is a hospital ceo.  he is not aware of anyone with insurance that has gone bankrupt attempting to pay for cancer treatments.

You could try asking some of the patients. Perhaps some of those who don't get to hospital in the first place.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sat Apr 28th, 2007 at 07:30:37 PM EST
[ Parent ]
I delayed responding here, because your comment is so silly.

Once again, you just don't know most of the people on this website, or their backgrounds.  Nor do Izzy and Migeru who so happily give your comment a 4.

In my case, I know many, many patients and people with health issues--both from the patient side since I have had perhaps an unusual amount of illness in my immediate family (if you hang out in treatment centers for cancer, you meet a lot of patients and their family--I hope you are lucky enough not to find this out), and from the professional side since I've been involved in developing products for doctors to treat patients (and yes you meet them, watch them treated, etc.) and involved in home health care.

The three of you have these arrogant attitudes that preclude anyone who has a different view than yours as to how economies can best run, from being compassionate people, that also want the best for mankind.    You don't allow that people that work in companies that develop and make products to help people in their lives, do this partially because they are compassionate people.  (I'm no real exception--there are literally hundreds of thousands of people like me that do this for a living, and feel wonderful when a product that they participate in developing, or show a doctor how to use on a patient,,that feel personally rewarded.  they devote their lives to this--and you are ignorant of that, or just outright reject it.)  This I am better than you attitude is disgusting to me.  The idea that I don't talk to patients, know people with problems, try to help them as best I can--you are a supercillious bunch, that is for sure!

by wchurchill on Sun Apr 29th, 2007 at 02:14:10 PM EST
[ Parent ]
Wow, I've been called a lot of things, but never supercilious.  This is a whole new class of insult for me -- I feel like I've upgraded!

I'm going to reply more substantively to your more heartfelt comment below, but will mention here that meeting people does not necessarily equate with understanding them.

Maybe we can eventually make language a complete impediment to understanding. -Hobbes

by Izzy (izzy at eurotrib dot com) on Sun Apr 29th, 2007 at 03:09:13 PM EST
[ Parent ]
The idea that I don't talk to patients, know people with problems, try to help them as best I can
I certainly agree that meeting doesn't necessarily lead to knowing.  some people can talk to someone for years and not understand them.  others can listen, understand, empathize and even help in very short periods of time.  hard to tell which is which on a website, imo.

thanks for taking my rant with some good humour.

by wchurchill on Sun Apr 29th, 2007 at 03:59:31 PM EST
[ Parent ]
Who said anything about cancer?  You're an awful one for jumping to conclusions.

I'll refrain from commenting about what a ceo may or may not know about insurance.  Suffice it to say almost no one has long-term care insurance -- practically no nursing home coverage -- and a chronic illness, or series of illnesses, can easily drain the coffers over a course of years.

As your ceo may even be aware, there are myriad types of insurance coverage with various co-pays, deductibles, exculsions, prescription pay scales, catastrophic caps, lifetime care caps, you name it -- there's a ton of ways to suck someone dry.  In fact, what used to be some of the better insurance plans were the ones with 80/20 coverage -- they'd pay 80% and you were 20% out of pocket -- nowadays 20% of even one hospitalization can be disasterous (although probably not to a millionaire, admittedly), nevermind a decade or so of care.

Maybe we can eventually make language a complete impediment to understanding. -Hobbes

by Izzy (izzy at eurotrib dot com) on Sat Apr 28th, 2007 at 07:51:51 PM EST
[ Parent ]
cancer still on my mind, I guess.

Unfortunately I have the long term care issue as well, with a parent.  also no long term care insurance.  still hard for me to see a multi-millionaire going bankrupt, but I obviously don't know the care requirements, and I imagine in some cases that could be a lot.

I wonder how that situation is handled in the UK or France?  I honestly don't know.

by wchurchill on Sat Apr 28th, 2007 at 08:23:48 PM EST
[ Parent ]
Nice way of dismissing 1/9 of the population. It's not like access to health case is a friggin' luxury.

Bush is a symptom, not the disease.
by Migeru (migeru at eurotrib dot com) on Sat Apr 28th, 2007 at 06:26:11 PM EST
[ Parent ]
Admittedly the 44 million uninsured is a big problem in the US.
and how does admitting that this is a big problem dismiss 1/9th of the population?
by wchurchill on Sat Apr 28th, 2007 at 07:08:25 PM EST
[ Parent ]
I detest charity! It is pittance, it is demeaning to those who have to be on the receiving end. Each one should have a right to basic necessities, such as housing, food, healthcare, schooling, etc. Okay, so the world is not perfect, and I don't say stop giving, oh no, we need something as a stopgap measure. But I don't find charity out of the kindness of ones heart to be a good system for wealth redistribution. And when it comes to large scale charitable projects, such as by Gates of Buffet, I see something downright disgusting in what it implies.

Sometimes I give to charity. Mostly by handing out money to homeless drunks in the park. Probably they will buy booze or drugs with the money. And that is fine with me. Not having much else, I think they should at least have their comfort substances... I don't see so many here in Geneva. In Boston they were everywhere.

by someone (s0me1smail(a)gmail(d)com) on Sat Apr 28th, 2007 at 07:12:06 PM EST
[ Parent ]
Giving to charities is a strong social and cultural value for many Americans.  I'm aware that it is not viewed as positively in many European countries.  It's one of many cultural differences between the US and EU.
by wchurchill on Sat Apr 28th, 2007 at 07:24:17 PM EST
[ Parent ]
Yeah, I know... I've had many fights with Americans over whether charitable giving should be considered a virtue to be celebrated, or a nasty little thing we have to live with 'cause we have failed to put in place a system to make it unnecessary.

So, my message is, yeah, give to charity. But don't feel virtuous about it. Don't congratulate yourself for being a good person. Have the insight to see how this giving represents a facet of the failure of society. The failure of capitalism. It's not a very positive message, this. One should feel dirty about it. The fact that one have what others don't and until some things are fixed, it is a necessary evil. And this is what I really detest about the Gates and Buffets. They are so god damn smug about it!! Gentlemen, wipe those fucking smiles off your faces! Suck on a lemon, or something.

by someone (s0me1smail(a)gmail(d)com) on Sat Apr 28th, 2007 at 07:33:44 PM EST
[ Parent ]
You're certainly entitled to your view.  And I would agree that is not something to be done to get worldly praise.  Many Americans are Christian and though this verse applies to praying, I think the concept would also apply to charity:
Matthew 6:5-6 (New International Version)

 5"And when you pray, do not be like the hypocrites, for they love to pray standing in the synagogues and on the street corners to be seen by men. I tell you the truth, they have received their reward in full.
6But when you pray, go into your room, close the door and pray to your Father, who is unseen. Then your Father, who sees what is done in secret, will reward you."

But I don't see helping a fellow man in need as something I should feel dirty about.  And I don't see all charitable donations as filling in for state failures.

by wchurchill on Sat Apr 28th, 2007 at 07:47:03 PM EST
[ Parent ]
So would this social and cultural value be an inferred responsibility, perchance?

Maybe we can eventually make language a complete impediment to understanding. -Hobbes
by Izzy (izzy at eurotrib dot com) on Sat Apr 28th, 2007 at 07:37:54 PM EST
[ Parent ]
to each his own view, and then his own action.  I have a couple of American friends who would agree with someone.  as you know, it's a big diverse country.
by wchurchill on Sat Apr 28th, 2007 at 07:54:52 PM EST
[ Parent ]
bruno-ken wrote a couple of diaries about this.

Charity in America

Charity, Solidarity & the L Word

Don't fight forces, use them R. Buckminster Fuller.

by rg (leopold dot lepster at google mail dot com) on Sat Apr 28th, 2007 at 07:46:27 PM EST
[ Parent ]
and hey, you're in them!

Don't fight forces, use them R. Buckminster Fuller.
by rg (leopold dot lepster at google mail dot com) on Sat Apr 28th, 2007 at 07:48:29 PM EST
[ Parent ]
The welfare state is charity, it's institutionalized and regulated noblesse oblige.

Welfare state = "the inferred responsibility of privileged people to act with generosity and nobility toward those less privileged"

Without this feeling of generosity, nobility and solidarity, there would be no popular support for the welfare state and it would be eliminated.

But it's not.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Sun Apr 29th, 2007 at 05:03:11 PM EST
[ Parent ]
really a good comment.  I had never thought of it that way, but you're absolutely right.
by wchurchill on Sun Apr 29th, 2007 at 05:12:42 PM EST
[ Parent ]
No, it's not charity. It's based on a charitable model, but its aims are much wider. Specifically:

Political stability

Making full of use of the available talent base in the population. (When poor smart kids stay poor because their opportunities are limited, no one wins.)

A practical expression of one of the cornerstones of Western humanism, which is the belief that all individuals are equally valuable.

Plus it's just plain moral. If you're that way inclined.

Private philanthropy, meanwhile, is all about the philanthropist. Sometimes it genuinely helps people. Sometimes it doesn't. But as a source of social progression, it's intermittent, often whimsical, and far too reliable and inconsistent to do more than offer a band aid here and there.

The Welfare State is really a political strategy, not just a way of giving people soup at Christmas.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Apr 30th, 2007 at 05:41:53 PM EST
[ Parent ]
I really like the way Starvid presented his point, but getting away from my initial positive reaction and reflecting more, your characterization is probably better.

I think I would better phrase my own views as welfare and charity being two parts of a political system that are not necessarily in conflict.  Each countries citizens need to decide within the framework of their own values, culture and society, what level of welfare support should be provided by the state.  and that level should be funded through taxes.  Different people and different countries obviously have different views on this depending on lots of factors--wealth of the country, views on personal responsibility versus family responsibility versus society's responsibility.  For example some of the Asian cultures have strong values around taking care of the elderly at home, and valuing their wisdom, love, and example of the circle of life and its impact on the younger in the family unit.

Once the majority agrees on that view (and surely it will change over time), individuals in the society may feel the bar is set too low, and be williing to contribute individually, or in groups such as churches, to raising the level of support for individuals.  that might be individuals as a whole, or it might be specific groups such as children, or perhaps people with addiction issues, etc.  It might also be that some very wealthy people feel a need to give back to society, and heavily fund programs.  While others with wealth may feel they earned it and they will spend it.

It would seem the two are not incompatible.

by wchurchill on Mon Apr 30th, 2007 at 07:07:45 PM EST
[ Parent ]
Good comment, but I'm going to quibble about it anyway.  The definition of "noblesse oblige" being quoted here is somewhat limited.  The problem with the whole concept is not with the "oblige" part, but with the "noblesse."  I know the definition of nobility is now rather generic, and there's nothing wrong with being noble by current standards, but the original concept is based on the notion that some people have a right to rule by accident of birth.  This used to be largely "God given," but we've somewhat dispensed with that.

In societies where your privilege is a function of who you were born to, the government serves the powerful.  In such instances, the function of the "welfare state" would indeed be charity.  The whole idea of democracy was to abolish this -- the government deriving it's power from people.  Such a government's welfare provisions are no more charity than parents feeding their children.  The beneficiaries of welfare in a democracy are entitled to the safety net because they are a part of the whole, not because a ruling class is feeling generous to outsiders.

(do I get any PN points for this?)

Maybe we can eventually make language a complete impediment to understanding. -Hobbes

by Izzy (izzy at eurotrib dot com) on Sun Apr 29th, 2007 at 05:43:28 PM EST
[ Parent ]
Jerome and I agree: philantropy is the social policy of feudalism.

Bush is a symptom, not the disease.
by Migeru (migeru at eurotrib dot com) on Sun Apr 29th, 2007 at 05:49:05 PM EST
[ Parent ]
The welfare state implies a right for everyone to a minimum standard of living. It imposes a duty of everyone to contribute thereto. It involves a collective decision of what constitutes a dignified existence. Further, the (proper) welfare state seeks to redistribute wealth, to eliminate inequalities, to abolish social class. It puts a limit on in-duh-vidualism.

Private charity assumes that those with more have the right to determine the causes worthy of their support. It assumes an absolute right to property, "my stuff is mine" and "I give only as I see fit, to those I deem worthy, the amounts I determine".

Yeah, I am far more comfortable with institutionalised charity.

There is a collective claim to 'your stuff'. You are not absolutely entitled to it...

The US expression: "My/your tax dollars": they are note mine/yours. They are 'ours', all of 'ours', owned collectively. That they may have at one point resided with you is incidental...

by someone (s0me1smail(a)gmail(d)com) on Sun Apr 29th, 2007 at 05:50:25 PM EST
[ Parent ]
There was an extremely good Diary a while ago on "Privilege" as a basis for taxation.

In particular the privilege of "private" ownership of "Commons" such as Land and Knowledge.

I have yet to come across any convincing refutation of the proposition that those who have exclusive rights of use of a "Commons" (rights which I agree may be necessary) should compensate those they exclude.

I find "Charity" as wounding a concept as "Welfare". Every citizen IMHO has a right to a part of the fruits of the "Commonwealth".

It's not so much about RE-Distribution - more about PRE Distribution.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sun Apr 29th, 2007 at 06:29:12 PM EST
[ Parent ]
I don't like the idea of everyone having a "right" to any specified standard of living. No one does. What we can afford depends on the health of our economy.

What we do in the welfare state is we decide collectively that we do not want those less fortunate to live in squalor, and hence we help them.

And with less fortunate I do not mean those who are born in poor families, but those who become less fortunate, no matter in which social class they began (as we have decided that class mobility is a good thing and have state funded education, free of charge for students).

We

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Mon Apr 30th, 2007 at 05:19:59 AM EST
[ Parent ]
I wasn't advocating a right to a "specified standard of living" - that is a different issue.

I was advocating the equitable sharing of the fruits of "the Commons". And I have yet to see a convincing refutation of that as a principle.

Private "ownership" of land, knowledge and other Commons are privileges, and those in receipt of these privileges should not keep all the benefits.

Whether such pre-distribution will be enough for a generally acceptable standard of living for the un-privileged depends on how developed a country is, I guess.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Mon Apr 30th, 2007 at 05:29:35 AM EST
[ Parent ]
These are the rules for welfare recipients in Sweden. I think it is rather exactly a definition of a minimum standard of living. Very much itemized for what everyone should be able to afford. (From the pages of Uddevalla commune, arbitrarily selected since the local authorities seems to keep this info. National rules, though.) And note, it is 'standard of living', not 'quantity of lifestyle' or any such sillyness. Which is right, I think.

Socialbidrag - Ekonomiskt bistånd Social welfare - Economic aid
Livsmedel
Kostnaden för hemlagad, näringsmässigt fullvärdig och varierad kost.
Food
Costs for home cooked, nutritionally complete and varied food.
Kläder/skor
Avser det vardagliga klädbehovet för hela året, skoreparationer och vissa tillbehör som väska, klocka och paraply.
Clothes, shoes
Evereyday clothing needs for the whole year, repair of shoes, and some accessories such as bags, watches and umbrellas.
Fritid/lek
Aktiviteter som det är rimligt att alla får möjlighet till, ex att läsa böcker, lyssna på musik och idrotta.
Leisure/play
Activities that are reasonable for everyone to be able to do, for example reading books, listening to music, participate in sports.
Hälsa och hygien
Kostnader för ex tvål, tandkräm, hårvård, blöjor och mensskydd.
Health and hygiene
Costs for soap, toothpaste, hair care, dipers, and femenine hygine products.
Förbrukningsvaror
Kostnader för rengöring, vård och skötsel av bostaden samt klädvård.
Cleaning supplies
Costs for cleaning and care of the home and clothes.
Dagstidning, telefon, TV-licens mm
En ettårsprenumeration på daglig tidning, abonnemangs- och samtalsavgift för fast telefon och mobiltelefon, TV-licens (ej kabel-TV) samt brevpapper, kort och frimärken.
Newspapers, telephone, TV-licece, etc.
One year subscription to a daily newspaper, phone fees and costs of phone calls for landline and mobile phone, TV-licence (not cable) and stationary, letter cards and stamps.
Tilläggsbelopp utöver riksnorm
Nedanstående poster ingår också i försörjningsstödet men har inte schabloniserats på grund av stora lokala och individuella skillnader. Det sker alltid en prövning av om de faktiska kostnaderna är skäliga.
Man utgår från vad en låginkomsttagare normalt har möjlighet att kosta på sig:
  • boendekostnad
  • hushållsel
  • arbetsresor
  • hemförsäkring
  • läkarvård
  • medicinkostnader
  • akut tandvård
  • glasögon
  • medlemskap i fackförening och arbetslöshetskassa
Additional costs over national norm
The below items have not been defined nationally due to the large local and individual differences. One always makes an individual investigation to see if the actual costs are reasonable.
One assumes that low income takes normally should be able to afford:
  • living costs
  • household electricity
  • work related travel
  • home insurance
  • medical care
  • costs of medicines
  • emergency dental care
  • glasses
  • membership in union and unemployment ensurance
by someone (s0me1smail(a)gmail(d)com) on Mon Apr 30th, 2007 at 06:03:03 AM EST
[ Parent ]
But that is not a non-negotiable standard. In a country poorer than Sweden, the acceptable minimum standard of living will necessarily be lower, because of what Starvid calls "the health of the economy".

Bush is a symptom, not the disease.
by Migeru (migeru at eurotrib dot com) on Mon Apr 30th, 2007 at 07:34:30 AM EST
[ Parent ]
Of course, I don't think I argued anything else... A collectively agreed minimum standard of living... Maybe I misunderstood Starvis's comment? But withing the context of a nation, yeah, there should be a right to a minimum standard. Hmmm, what are we arguing about, again?
by someone (s0me1smail(a)gmail(d)com) on Mon Apr 30th, 2007 at 07:41:26 AM EST
[ Parent ]
Say, things like the right to housing in France.

The issue is that "liberals" don't believe in the right to an outcome, they believe in the right to "fair rules".

Bush is a symptom, not the disease.

by Migeru (migeru at eurotrib dot com) on Mon Apr 30th, 2007 at 07:43:39 AM EST
[ Parent ]
What does "harvard" mean in Swedish? Diapers? LOL

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Mon Apr 30th, 2007 at 10:16:14 AM EST
[ Parent ]
That would be haardvaard, pronounced "horvord".

Bush is a symptom, not the disease.
by Migeru (migeru at eurotrib dot com) on Mon Apr 30th, 2007 at 10:21:30 AM EST
[ Parent ]
Careful, though. "Horvård" would be "whore care"...
by someone (s0me1smail(a)gmail(d)com) on Mon Apr 30th, 2007 at 10:33:18 AM EST
[ Parent ]
LOL

I hate vowel length.

Bush is a symptom, not the disease.

by Migeru (migeru at eurotrib dot com) on Mon Apr 30th, 2007 at 10:34:25 AM EST
[ Parent ]
And:
"hair" == "hår", pronounced much like "whore"
I can quite imagine some Swede entering a barbers place somewhere saying: "I vud like to get my whore cut.."
by someone (s0me1smail(a)gmail(d)com) on Mon Apr 30th, 2007 at 10:39:59 AM EST
[ Parent ]
That would be a much funnier association for 'the little red-brick school up the river'. "Hair care" less so.
by someone (s0me1smail(a)gmail(d)com) on Mon Apr 30th, 2007 at 10:30:46 AM EST
[ Parent ]
I have had direct responsibility in creating new technologies that have saved hundreds of thousands of lives, and improved the quality of life for hundreds of thousands more.

In addition, a great deal of my income in absolute terms and % terms goes to help people in need.

Okay, but pause here and look at how this framed. You're the successful investor and generous philanthropist.

And they are - what?

Do you know any of the people you spend your philanthropy on? How much time have you spent with them in person? Do you know what their lives are like on a daily basis?

With the Dow soaring, are they more or less happy and fulfilled now than they were six years ago? Are their lives easier or harder? Are they more or less in debt? How much of that debt is voluntary? Has their disposable income gone up or down?

That's the human angle here.

If you talk to them, what are they telling you?

by ThatBritGuy (thatbritguy (at) googlemail.com) on Sun Apr 29th, 2007 at 06:07:05 AM EST
[ Parent ]
just to clarify, the involvement with new technologies saving lives was not as an investor, but as one actually working with doctors, patients, engineers, and everyone else involved in developing and getting new technologies to markets.  investing is hands off (though still helpful because doers need capital), this was hands on.

second, I don't think of myself as a philanthropist.  just a guy that has worked hard and been lucky enough to have some success.  It just seems right to me to help other people when I can.  i was helped with scholarships and loans getting through my education.  when i've had difficult times in life with family health issues, people always seem to pop up with some kind of help--encouraging word, a new idea, a contact.  it just seems part of life to me.

your questions seem to imply that I'm far away from people with lower incomes who are in need.  I'm not.  as I've said in other posts, I grew up in that kind of environment--amongst people who didn't really think about having low incomes, or needs, but rather were just working hard and living their lives.  my broad family has many that are low and medium income, still far, far from wealthy.  i've always chosen to live in areas that are very diverse, both racially and economically.  there seems to be an expectation here that people that have had financial success are automatically out of touch.  maybe that is true of Buffet and Gates, but many successful Americans are very involved in their communities, and very in touch.  

but I don't know many, probably most, of the people who I give money to--for example, no one effected by the tsunami, no one who got my Katrina donations, and no one who benefits from the money I give to support collegue scholarships.  but I know people like them--they're all around me in my community, in my family, and among my friends.

by wchurchill on Sun Apr 29th, 2007 at 01:53:45 PM EST
[ Parent ]
I can't speak for anyone else, but I certainly do not think that you're a bad person (and I haven't gotten that from others' comments either).  In fact, you seem like a nice person, which makes your arguments and lack of understanding all the more infuriating.

Here's the problem as I see it.  People writing on political boards usually have in mind political change -- they either want change or don't want people changing things -- but either way they're addressing big picture stuff or systems.  When you're talking big systems, there's going to be a lot of generalizing and a lot of instances that are exceptions.

If they want change, they're usually concerned with either making the system work well for more people or stopping it from hurting less people, so they say things critical of the system and give examples of people it hurts or where its not working.  

If they don't want change, they'll say the system is fine and that the problem is really with the people trying to change it.

So do you see the problem here?  Politics is by its very nature adversarial -- a power struggle in a constant balancing act.  By saying the US economy is all good and fine, you are not being cheery and pleasant, but putting yourself in a position where you are blocking people who are trying to change things.  

I don't have a clear idea if that's your goal here or not, but when you deny political problems, you also deny solutions, in this case the impoverished, unemployed, and uninsured.  If you think there's no political solution to these things, just say so, but in so doing, know that you are implying the problem is with the people affected.

Maybe we can eventually make language a complete impediment to understanding. -Hobbes

by Izzy (izzy at eurotrib dot com) on Sun Apr 29th, 2007 at 04:06:51 PM EST
[ Parent ]
Call me crazy, but I didn't feel like ThatBritGuy was calling me a nice person with this comment:
I'm not interested in 'investing' if it makes people suffer. You - and millions like you - apparently have no interest in the human story behind those precious numbers of yours.
That's where we're different. Until you understand this, you will never be able to make sense of most of what's said on this site.

This is the comment, with my response, that started this whole portion of the dialogue.

by wchurchill on Sun Apr 29th, 2007 at 04:26:25 PM EST
[ Parent ]
He made an observation about your interest level -- you made the value judgment.

For instance, if I was on a board, say, arguing with people who wanted to outlaw birth-control and they accused me of having no interest in the hypothetical lives of the unborn, I would say they were right.  I wouldn't contradict them.  I might argue that this did not make me a bad person, but I wouldn't say they were misunderstanding me.

If you think being uninterested in the people behind numbers in our current discussion makes a person "not nice," then you either have a problem with reconciling your beliefs to your actions, or with the way you're communicating them.  It's on you to explain, not on TBG to divine your meaning.

Maybe we can eventually make language a complete impediment to understanding. -Hobbes

by Izzy (izzy at eurotrib dot com) on Sun Apr 29th, 2007 at 05:56:24 PM EST
[ Parent ]
You - and millions like you - apparently have no interest in the human story behind those precious numbers of yours.
The fact that people have interest in the Dow, the CAC, or any other index simply does not equate to people who "have no interest in the human story".  There is no logic there.

If you think being uninterested in the people behind numbers in our current discussion makes a person "not nice," then you either have a problem with reconciling your beliefs to your actions,
Why would you attempt to put those words in my mouth?  I clearly responded to that statement to ThatBritGuy:
As to "You - and millions like you - apparently have no interest in the human story behind those precious numbers of yours."  That is obviously an insult, and you intend it to be one.  But you don't know me, and have absolutely no basis for that statement.  If you did, you would know it couldn't be farther from the truth.
 There is nothing inconsistent about being interested in the Dow and being a nice guy.

or with the way you're communicating them
Nor is there anything wrong with the way I'm communicating.  Follow this little gem, as just an example:
wc:...Admittedly the 44 million uninsured is a big problem in the US....
migeru:Nice way of dismissing 1/9 of the population. It's not like access to health case is a friggin' luxury.
wc:and how does admitting that this is a big problem dismiss 1/9th of the population?
migeru: no response

I can't take responsibility for the misinterpretation of what I say, or the resulting lack of logic in imputing my motives.  However I do understand it,, most on the site are very far left idealogues,,,not all but most.  Anyone who is left in American terms, but right from the ET norm, is open to gross misinterpretation, and slandering of character and motives.  If it bothers one too much, they should just drop off the site.  Obviously it hasn't bothered me too much, but it has caused me to take long breaks at times.  It's worth it for me because I get a view of the European far left, reference to great articles I wouldn't otherwise see, and, just as an example, a European view of the French presidential election.  But one has to be willing to take some insults, and I find it hard to believe that you don't understand that this one was an insult, and was meant that way:

You - and millions like you - apparently have no interest in the human story behind those precious numbers of yours.
That's where we're different. Until you understand this, you will never be able to make sense of most of what's said on this site.
I called ThatBritGuy on that point of insult specifically, and he didn't respond,,,,because it was and it was meant to be, he knows it and I know it.  And he has responded to other following points on the thread, so he's obviously standing by it--which is fine with me btw, we are both adults and can take a little back and forth,,,,I'm just taking issue with you not seeing the obvious insult, instead saying it's some value judgement on my part and I'm somehow incapable of understanding when I've been insulted.  I mean is that arrogant on your part, or what!?  I don't need you to help me interpret comments from ThatBritGuy or others--and I doubt he needs help either.
by wchurchill on Sun Apr 29th, 2007 at 07:39:50 PM EST
[ Parent ]
I'm noting, good humor aside, that this is basically the second time you have called me arrogant in this thread alone.  You need to look at yourself and your communications with other people instead of pretending to be all wounded when they call you on what you're saying.

I never said TBG's comment was not insulting.  I said you're the one who interpreted the insult into you not being a "nice" person.  

And claiming the argument is based on you being enthusiastic about the DOW is ridiculous.  You either lack reading comprehension or you're being disingenuous (gee -- was that arrogant or was it supercilious?  neither, I think -- maybe you can come up with another name to call me).

It looks to me as though the argument is based on this:

TBG: "The US economy is only 'growing' if you're in the mythical top 1%.

For everyone else in the US, the economy is a deeply sucky thing"

WC:  "we both live in free countries.  if you want to believe this stuff, be my guest."

So, you think that basically saying it's a free country and your facts are a "belief" is... ?  not confrontational or dismissive?  merely showing enthusiasm for the DOW?  I think describing it as "disinterest" was being generous.

Y'know, there's a saying -- if one person's an asshole, it's probably them.  if everyone's an asshole, it's probably you.  With that in mind, why do YOU think you are so consistently "misunderstood" on this site?

I'm giving you the benefit of the doubt and allowing that you may not realize how insulting you're being -- you're doing your best to prove me wrong.

Maybe we can eventually make language a complete impediment to understanding. -Hobbes

by Izzy (izzy at eurotrib dot com) on Sun Apr 29th, 2007 at 08:29:03 PM EST
[ Parent ]
I think that both you and wc (Hell, everyone on ET) should tune in - if you haven't already - to the Rhetoric of Now thread.

I regard the "Right/Left" distinctions as obsolete, and that most of us on ET - including wc probably - share the same Values.

Where we differ is how we express those Values - and boy can that lead to trouble.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Mon Apr 30th, 2007 at 04:06:47 AM EST
[ Parent ]
Just follow the Dow.

Bush is a symptom, not the disease.
by Migeru (migeru at eurotrib dot com) on Mon Apr 30th, 2007 at 04:23:52 AM EST
[ Parent ]
Rhetoric of Dow?

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Mon Apr 30th, 2007 at 04:28:00 AM EST
[ Parent ]
No, the Dow The Jinx.

Bush is a symptom, not the disease.
by Migeru (migeru at eurotrib dot com) on Mon Apr 30th, 2007 at 04:31:18 AM EST
[ Parent ]
Y'know, there's a saying -- if one person's an asshole, it's probably them.  if everyone's an asshole, it's probably you
where does this come from?  you seem to be implying that I have called, or think, someone is an asshole in this dialogue.  I haven't, and I don't think anyone on this site is an asshole.  You are over the line with the implication, and more than impolite in using the term.
by wchurchill on Mon Apr 30th, 2007 at 11:04:37 AM EST
[ Parent ]
Oh, so being polite is important?  is calling people arrogant and supercilious polite?  you imagine you're nothing but well-mannered with your insults?  If you'd like, I can go through this thread and downrate all your comments that have been insulting and name-calling so you'll have a guideline.

And nice way to avoid the main point of a comment once again.  

Does it really matter where the saying comes from?  I assure you it's quite common in the US in the "regular" people circles you claim to be so familiar with.  The meaning has nothing to do with you or calling people assholes -- it simply means that if you have a problem with lots of people (as opposed to one person) that the problem may lie with you rather than the other people. But you really didn't need that explained, did you?

Maybe we can eventually make language a complete impediment to understanding. -Hobbes

by Izzy (izzy at eurotrib dot com) on Mon Apr 30th, 2007 at 12:57:53 PM EST
[ Parent ]
You - and millions like you - apparently have no interest in the human story behind those precious numbers of yours.

The fact that people have interest in the Dow, the CAC, or any other index simply does not equate to people who "have no interest in the human story".  There is no logic there.

The context comes from the fact that Jerome and others have posted fact after graph after study pointing out that the wealth in the Dow is not currently being shared with those who aren't in the share owning class - a subset of the US population which happens to include the vast majority of it.

Similarly, there is endless evidence that real incomes among most of the US population are either static or shrinking in real terms.

If I was insulting, it was to try to hammer that point home against a smokescreen of standard issue exceptionalist rhetoric about how investment supposedly makes everyone richer.

You are of course entitled to believe that having the Dow at record levels makes everyone richer. But the point of this debate is that there is absolutely no evidence to support that point of view, and plenty of hard evidence to contradict it.

And yes - I can be abrasive when someone dismisses a year's worth of posts on ET which have underlned, examined, discussed and dissected that evidence with a curt 'Hey - you can believe what you want. We both live in free countries.'

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Apr 30th, 2007 at 05:57:36 PM EST
[ Parent ]


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