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Cullion
6th May 10, 06:58 PM
I believe so, but the mechanism isn't easy to unpick.

I believe that, in the long term, inflation of the money supply transfers real wealth from the 'median average' member of the population towards the wealthiest fraction who have 'first use' access to that new money.

I will use American statistics to conduct this argument, because they are the easiest to access, and they are the most immediately meaningful to the majority of Sociocide posters.

First, lets look at the decline in purchasing power of the US dollar in terms of what the average guy earns, vs what the average home costs in the same year, from 1963 to 2005.

http://images.forbes.com/media/2007/06/26/dreamchart_780.gif

Now, this graph certainly doesn't give the whole picture. In order to do so, I'd have to compare this divergence between home prices and incomes against a graph plotting home-starts against population, so that we could see if there was a divergence between homes-available and population which was sufficient to explain the price-change vs incomes.

It may also be the case that the graphs above are inaccurate in some way I'm not aware of, and this should certainly be examined. I'm not trolling in this thread.

bob
6th May 10, 07:01 PM
I assume you mean what the average guy earns.

Cullion
6th May 10, 07:04 PM
I edited my typo before you posted, I think. Which part is unclear to you ?

bob
6th May 10, 07:07 PM
Nothing now. That was all.

HappyOldGuy
6th May 10, 08:35 PM
One aspect of your graph that might be misleading is using average wage. I think that average household income might be a better comparison. I'm not sure what that is going to do to your argument, since I'm not sure where you are going with it yet.

Very curious though.

http://www.ritholtz.com/blog/wp-content/uploads/2009/02/avg-house-avg-income.png

BadUglyMagic
6th May 10, 09:06 PM
Uh, what mechanisms/sources are you holding responsible for the increase in the supply of money?

Cullion
7th May 10, 04:08 AM
I'm not going to be able to research and post more detail until this evening, but I'll give a quick explanation of what I'm thinking for HoG's benefit.

As I explained in the other thread, I have a theory that the time delay between new money being created and a particular asset's price actually going up is a mechanism that allows wealth to be concentrated over time, because the person who gets the money earliest gets to buy stuff with it before prices have adjusted upwards in proportion to the new money supply.

I'm going to try to demonstrate this by showing people's purchasing power for certain types of asset decreasing over time. One thing I would note about HoG's graph is that I believe that whilst it shows a slight upward trend in the price of a home relative to 'household' income, it understates the case because the trend over the period is for each 'household' to be more likely to contain two full time wage earners rather than just one.
So it is understating how much less an individual Working Joe's income is worth.

Please don't consider this one of our usual left-vs-right arguments, because in this thread I'm trying to explain a mechanism which I think a wealthy elite benefits from at the expense of everybody else. I am not telling people to 'be more self reliant' or blaming 'commie' politicians here.

Cullion
7th May 10, 07:34 AM
Uh, what mechanisms/sources are you holding responsible for the increase in the supply of money?

Two things:-

Fractional reserve banking, and the Fed's power to simply create money at the (figurative) stroke of a pen.

Ajamil
7th May 10, 07:40 AM
http://www.ritholtz.com/blog/wp-content/uploads/2009/02/avg-house-avg-income.png
Can someone explain this graph a bit better? It's showing the ratio of house price to household income over time. What are the shaded areas representing? The dotted lines? Is the horizontal bar the average?

BadUglyMagic
7th May 10, 10:44 AM
It is possible that the real estate market in the US is not the best example( not that I have a better one).

Are you going to define a particular time period or go with the one on the graph?

Cullion
7th May 10, 10:52 AM
I'm going to be looking at other data sources too, my ideal datasets would go back further in time, ideally before the founding of the Federal Reserve.

HappyOldGuy
7th May 10, 10:57 AM
Household income is absolutely about the shift from 1 to 2 wage earners. Individual wages from the 25-75% have been mostly flat with a slight downwards trend towards the bottom and a slight upwards trend towards the top.

Which one is more relevant is going to depend on the point you are trying to make. I'm really interested to see your argument.

Cullion
7th May 10, 11:06 AM
I believe individual income is more important because the point I'm trying to demonstrate is that the amount of certain goods (assets like a home being important ones) for a given number of hours of labour has declined due to this mechanism.

'It's okay, we can nearly afford as much house as long as we both go out to service the debt' would represent a decline in the real value of a working joe's labour over time relative to the median house.

I think that part I can show fairly clearly.

The more complex and controverial bits are going to be:-

i) Convincing you that monetary mechanisms played a significant role in this (and the decline of real purchasing power with certain other goods)

ii) Showing that the same mechanisms also represent a wealth transfer to a small super-wealthy social class, enabled not through free trade, but by a special legal privilege that allows them to strongly influence money-creation via undemocratic means.

Please be patient with me, gotta a lot of graphs to dig up, and I'm at work right now. It's going to take me more than one day to try and make this argument in any kind of satisfying way.

BadUglyMagic
7th May 10, 01:18 PM
I'm going to be looking at other data sources too, my ideal datasets would go back further in time, ideally before the founding of the Federal Reserve.

That will be one monster "Z" factor. Where "Z" = fudge.

BadUglyMagic
7th May 10, 01:20 PM
. It's going to take me more than one day.....


Quoted for truth. I have a publisher for the finished product.

HappyOldGuy
7th May 10, 01:26 PM
To make this easier for you (honestly) I'm gonna show any obvious points that might affect your model as they occur to me. Housing may not be your best bet just because it is so picked over (post collapse), but one thing I know from looking at it is that people are spending more, but they are also getting more (http://www.census.gov/const/C25Ann/sftotalmedavgsqft.pdf).

Cullion
7th May 10, 02:10 PM
The data you've just provided for me is interesting, and it highlights the problem that I'm not comparing like with like over the years.

Do you know of a source that would let me correlate the average size of new builds, with the proportion of all homes sold that year which new builds comprised?

Or possibly an equivalent to our 'land registry' where I could construct my own graph from a sample of homes where I was able to compare the price of the same home over time?

I'm quite willing to accept that I my case may be incorrect, but I definitely want to stick with analysing housing for now because a home represents the following:-

i) It's a big ticket capital asset that the vast majority of people borrow money to acquire and a large proportion of the population consider a necessity. It's not something like gold coins, or a gym membership.

ii) It's price is less affected by other factors like access to imports from other societies so I believe that if my case is correct, it will be more clearly discernable here.

If I can't base this case around things that the working middle class actually buy (although housing won't be the only thing I look at), then I don't have much of a case. That's why I'm not going to dick around analysing the price of stuff like gold bullion etc..

Feryk
7th May 10, 02:56 PM
There is another factor to consider.

Housing prices are less relevant to inflationary effects on the middle class than the cost of borrowing is. If a house is three times the price it was in 1980, but the cost of borrowing is 1/3rd what it was, then the consumer is effectively not impacted. They can go out and buy a home for three times the price because they can still afford to service the debt.

That's why debt levels have risen dramatically since 1990. It's also one reason why real estate in the US kept going up in value...no problem to pay more if my payments are lower or the same.

To truly analyze the impact of inflation with respect to housing prices, you need to look at the cost of servicing the mortgage in real dollars. You have to look at average mortgage costs, not a constant mortgage amount, because mortgages have been rising. (I can't find any graph anywhere of this, btw)

As HOG pointed out, houses are also getting bigger, so the real data would be the cost of debt/square foot. God help you trying to find that out.

Feryk
7th May 10, 03:00 PM
This might help the discussion.

http://www.mybudget360.com/wp-content/uploads/2010/01/the-cost-of-homeownership1.png

Cullion
7th May 10, 03:21 PM
There is another factor to consider.

Housing prices are less relevant to inflationary effects on the middle class than the cost of borrowing is. If a house is three times the price it was in 1980, but the cost of borrowing is 1/3rd what it was, then the consumer is effectively not impacted. They can go out and buy a home for three times the price because they can still afford to service the debt.

That's why debt levels have risen dramatically since 1990. It's also one reason why real estate in the US kept going up in value...no problem to pay more if my payments are lower or the same.

To truly analyze the impact of inflation with respect to housing prices, you need to look at the cost of servicing the mortgage in real dollars. You have to look at average mortgage costs, not a constant mortgage amount, because mortgages have been rising. (I can't find any graph anywhere of this, btw)

As HOG pointed out, houses are also getting bigger, so the real data would be the cost of debt/square foot. God help you trying to find that out.

When we look at the cost of debt, are we looking at what the median average person actually pays, or what the median average person would pay if they bought a house at that point in time ?

It's important I understand the distinction, because the last time I did this comparison I was looking at the UK, where variable-rate mortgages are much more common (they're the norm, and have been for decades). I'm aware that North Americans are more likely to fix their interest for 30 years, only changing rate when they take out a new mortgage.

i.e. in the UK there's a much stronger link between the cost of the house at the time you buy it, and the overall cost of the debt, because buying an expensive house on a variable rate mortgage when rates happen to be low doesn't mean that you've got lower debt costs in the long-run.

I'm aware that this is going to be substantially effected by the American cultural tendency to fix interest rates for a long time, but I need to try to put numbers to it.

It's also not clear to me from the graph above whether it's talking about individual income, or household income.

jvjim
7th May 10, 03:31 PM
A comparison to commidities like oranges and pig futures and oil, or baskets of commodities, might be useful as well.

HappyOldGuy
7th May 10, 03:31 PM
Here is the root page that my graph came from.

http://www.census.gov/const/www/newresconstindex.html

Might have some of what you are looking for.

Cullion
7th May 10, 03:57 PM
I'm going to have to hunt through statistical PDFs from the St. Louis Fed for the income data I need now :(

But at least they have credible stats about personal income stretching back a long time (it goes back to the era I need).

I have a feeling finding even raw data from which I can calculate the median price per square foot stretching back to the era when the Fed was founded is going to be hard :(

Cullion
7th May 10, 04:23 PM
A comparison to commidities like oranges and pig futures and oil, or baskets of commodities, might be useful as well.

Oil could, but I'm wary of things where the effect of access to new (cheaper) suppliers through globalisation would obscure the effect.

That's why I'm starting with a look at a widely used, locally produced capital asset first.

BadUglyMagic
7th May 10, 05:16 PM
Oil could, but I'm wary of things where the effect of access to new (cheaper) suppliers through globalisation would obscure the effect.

.


Cost reductions through globalization will change consumer product prices just as price reductions through changes in technology. Same dealio when arbitraging your domestic and foreign sourced manufacturing output.



How will the difference in construction materials and methods be accounted for in your model. Over the last twenty or so years there have been various changes in the types of materials used, where those materials are sourced and how they are manufactured. Also, local and regional costs may reflect differences in construction zoning laws not necessarily related to local wages.



Especially in the last twenty years it will be difficult to find any commodity that did not have changes related to changes in production technology and including cost reductiions.

Cullion
7th May 10, 05:49 PM
I wasn't planning to account for that, because I didn't think I could.

If you think you can help (even if it proves me wrong) that's great.

BadUglyMagic
7th May 10, 07:05 PM
I wasn't planning to account for that, because I didn't think I could.

If you think you can help (even if it proves me wrong) that's great.




Oh, I thought you were going to prove it. I was serious when I said I had a publisher for the finished product.

Have you decided on a beginning year and determined the base amount of money and cash equivalents in circulation at that time?

Cullion
7th May 10, 07:08 PM
I think the beginning year needs to be 1913 at the latest, because that's when the Federal Reserve was founded, and I can get income data going back that far (from the St. Louis Fed website, ironically). The house price/square foot data over a simillar time period is harder, I'm still pulling blanks on that.

I think lacking pre-Fed data for the squre-foot pricing is tolerable, but ideally it would still include the era when the US was involved in WWI.

BadUglyMagic
7th May 10, 11:41 PM
Help me out. Post a link to the original thread containing your explanation of the mechanism. Pretty please.

Cullion
8th May 10, 06:33 AM
I start arguing about it here http://www.sociocide.com/forums/showpost.php?p=1543948&postcount=75

In order to demonstrate this I would first have to show real-terms reductions in middle class purchasing power, which I believe will be demonstrable in the housing market over very long periods of time (after population growth vs housing stock and increases in square footage), and some other goods.

If I can demonstrate that, I'll then move on to trying to demonstrate how the effect is caused by long-term monetary policy by the Fed.

Craigypooh
8th May 10, 08:38 AM
I have a theory that the time delay between new money being created and a particular asset's price actually going up is a mechanism that allows wealth to be concentrated over time, because the person who gets the money earliest gets to buy stuff with it before prices have adjusted upwards in proportion to the new money supply.

Are you saying that when the Fed creates money it goes to Richey Rich, who then runs off and buys average houses, he then waits for the money to filter down to average Joe and sells the house to him for a 10% profit?

Cullion
8th May 10, 08:44 AM
No, I think the fed creates the money and gives it to top-tier banks who use it to make loans and trade in other financial instruments. I think the inflation in house prices (and other goods I want to look at) occurs further on down the chain as the money makes its way into general circulation.

Craigypooh
8th May 10, 08:58 AM
Well yes, but how does that make average Joe poorer? - given that wages tend to rise faster than inflation.

Cullion
8th May 10, 09:02 AM
Because I believe that the official inflation measure excludes or obscures inflation in certain important goods which I believe to increase in price faster than wages.

I think this is a symptom of a transfer of real wealth that is somewhat masked by the substitution of imports from low-labour cost economies and technological advance.

Craigypooh
8th May 10, 09:17 AM
OK - so here's the basket of goods which make up the UK RPI index:


Food 118
Catering 50
Alcohol 63
Tobacco 27
Housing 236
Fuel and light 49
Household goods 70
Household services 61
Clothing and footwear 39
Personal goods and
services 41
Motoring expenditure 121
Fares and other travel
costs 20
Leisure goods 38
Leisure services 67
Weights are specified as parts per 1000 of the all items RPI


Which ones are wrong and what should the weights be?

Cullion
8th May 10, 09:23 AM
If I get into UK RPI it will be a bit of a derail, I have enough stuff to look up already. It's explained better in the earlier posts.

BadUglyMagic
9th May 10, 01:02 PM
Soooooo, should we just go ahead and declare this thread dead?

Cullion
9th May 10, 01:41 PM
It's going to take me more than one day.....

I'm still filtering through stuff on incomes. I'm sorry for you if that means a publishing deal fell through.

elipson
9th May 10, 03:52 PM
Well yes, but how does that make average Joe poorer? - given that wages tend to rise faster than inflation.

I demand sources.

BadUglyMagic
10th May 10, 08:51 AM
I'm I'm sorry for you if that means a publishing deal fell through.


I'll survive.

Feryk
10th May 10, 10:10 AM
Listen, IF Cullion can pull this off, he needs to get a faculty advisor to sponsor him...because this is the work of a doctoral (or post doc) thesis. His basic premise may or may not be proveable with this method, but just to be able to show that the average price/sq. ft. of a typical home is rising faster than wage inflation, resulting in a real loss of buying power of the average consumer over the last 100 years would be a major accomplishment.

IF it's true. I don't happen to think so, but I'm interested to see what he uncovers.

HappyOldGuy
10th May 10, 10:19 AM
^^^Yep. I just hope he goes past just proving the housing prices point, because it's the bit between the fed loans bank money and profit!!! that I'm not clear on.

BadUglyMagic
10th May 10, 10:56 AM
It may help us to follow you if the hypothesis and all its requirements were in one post. It seems (to me) that clearly defined comodities and asset classes are important. Same for wages, financial systems and economic terms.

Cullion
10th May 10, 02:28 PM
I want to plot median personal income (stretching as far back as possible, ideally 1913 or beyond) against median price per square foot of real estate over the same period, both quoted in nominal dollars.

I've got a paper with useful stats from Prof. Saez at Berkeley that I might be able to extract median personal income each year from.

BadUglyMagic
10th May 10, 03:54 PM
I want to plot median personal income (stretching as far back as possible, ideally 1913 or beyond) against median price per square foot of real estate over the same period, both quoted in nominal dollars.

I've got a paper with useful stats from Prof. Saez at Berkeley that I might be able to extract median personal income each year from.


Sorry, I meant hypothesis in more along the lines of:


I believe that, in the long term, inflation of the money supply transfers real wealth from the 'median average' member of the population towards the wealthiest fraction who have 'first use' access to that new money.

Cullion
10th May 10, 05:48 PM
So far I've only got figures from 1973 to 2007 for median incomes, median new (completed for sale that year) home square footage and median new home sale price (all from the US Census). I couldn't extract median personal income from the data published by Prof. Saez that I've looked at so far.

Sources looked at so far:
http://www.census.gov/hhes/www/income/histinc/h05.html
http://www.census.gov/const/C25Ann/sfforsalesqft_2007.pdf
http://www.census.gov/const/uspriceann.pdf

Unfortunately I've only found data on sales price and square footage for new homes, rather than median square footage for all homes sold, and median price for new homes sold.

I want data for median square footage and price for all homes sold each year, and over a period stretching back until 1913 at least.

BadUglyMagic
10th May 10, 08:20 PM
http://mysite.verizon.net/vzeqrguz/housingbubble/united_states.png





http://mysite.verizon.net/vzeqrguz/housingbubble/



Disclaimer: I have no connection to this website.

There are some additional links on the site.

It has been said before, there are a number of factors involved in home sales prices and monetary inflation is only one of them.

Cullion
11th May 10, 04:17 AM
It has been said before, there are a number of factors involved home sales prices and monetary inflation is only one of them.

Thanks for the useful graph. I absolutely expect there to be multiple factors, which is why I'm trying to look at median price per square foot to start. Then I'll factor in other things where possible.

I'm not going to ignore data that undermines my hypothesis, because if I'm wrong I'll still have learned something.

Feryk
11th May 10, 09:22 AM
That graph points to the game changing substantially in the US around 2002, when it left the trend line. My guess is that is when deregulation of the financial industry hit it's full stride, but I am aware that I am making that leap without conclusive evidence.

HappyOldGuy
11th May 10, 10:36 AM
That graph points to the game changing substantially in the US around 2002, when it left the trend line. My guess is that is when deregulation of the financial industry hit it's full stride, but I am aware that I am making that leap without conclusive evidence.

One thing you are seeing is the explosion of the subprimes. All of a sudden in 2002-2003 you have 50% more people who can afford to bid for a house due to newly available subprime loans, which drove the prices through the roof of course. I have still never gotten an adequate explanation whether there was some triggering action/primary driver or if it was a lemming flood just waiting for one little rodent to lead the way.

http://bigpicture.typepad.com/.shared/image.html?/photos/uncategorized/subpprime.gif

Cullion
11th May 10, 10:59 AM
Cookie-cutter right wingers would blame Clinton-era legislation of the mid-late 90s, but IMHO the lemming flood was a flight out of equities after the dotcom crash.

i.e. I think more people started investing in real estate (e.g. rental properties) instead of stocks.

Median wages were still growing much more slowly than median real estate prices in the 'stable' pre-bubble part of the graph, but that's the part I need to filter for increasing property size, construction costs blah, blah.

BadUglyMagic
11th May 10, 01:25 PM
i.e. I think more people started investing in real estate (e.g. rental properties) instead of stocks.

.


How may units would have to be sold to account for that? How would you account for the massive capital losses that occurred drung the dot.com bust?

Real estate is relatively illiquid. But to follow that you could research REITs for the last 20 years.

Feryk
11th May 10, 03:08 PM
Cookie-cutter right wingers would blame Clinton-era legislation of the mid-late 90s, but IMHO the lemming flood was a flight out of equities after the dotcom crash.

i.e. I think more people started investing in real estate (e.g. rental properties) instead of stocks.

Median wages were still growing much more slowly than median real estate prices in the 'stable' pre-bubble part of the graph, but that's the part I need to filter for increasing property size, construction costs blah, blah.

I agree with you. And all those people looking to invest 'safely' went hogwild on leveraging themselves at 20:1 or better. I saw a 'get rich in real estate' presentation where the guy was talking about 'infinite leverage'. Essentially it was the concept of using no money down times as many properties as you wanted to do it with. Wait for growth (1 year) and suck out the equity and do it again.

The sad part is that he was right. There were bankers lined up around the block to lend people money to do exactly this. That is why I was mentioning deregulation. It took shady banking practices to drive the dot com refugees into the real estate market.

Cullion
11th May 10, 05:44 PM
How may units would have to be sold to account for that?

I don't think real estate prices could be entirely coupled to flight out of equities for exactly the reason you state. I can see middle-class Americans with good credit ratings and substantial savings liquidating their portfolios and getting into real estate, but foreigners selling US stock would've mostly gone elsewhere because buying and managing a property in another country.

I think when substantial amounts of new money are created, they slop around in the economy creating booms in different assets until the game of musical chairs stop and the money finds it's home in commodities (CPI inflation), then last of all, working Joe's paypacket. Way after the party's stopped.

I think that the people who have access to lots of low-interest money at the beginning of each asset boom essentially transfer real wealth from the later investors to themselves without actually offering new useful goods or services back to the economy to justify their profit.

That's why a free-market crazy like me can simultaneously rant against the way our system of money, credit and banking works. I see it as a carefully controlled counterfeiting cartel, rather than a beacon of free-market capitalism.

That's what I'm trying to document in this thread, I want to be able to document the transfer of wealth that I believe occurs. My instincts tell me it should show up in working joe's wages lagging behind the price of various domestically produced goods (particularly those that tend to be bought using credit).

If I can't, well I'll just have to go back to the drawing board.



How would you account for the massive capital losses that occurred drung the dot.com bust?

In many cases, the dotcom companies themselves consumed the capital. It was capital burned for unproductive consumption, essentially. Like taking out a fraudulent mortgage and then, like, going on a huge fucking luxury cruise with 2 hookers. Like, uh, like what the Greeks did.

I was there for the final year of the UK's version just out of graduate school. I can still remember when substantial numbers of people in nice suits who gave the appearance of being well educated thought that boo.com was a good idea.

People just a few years out of school who were good at fronting in presentations were being handed millions and millions of pounds and allowed to pay themselves 6 figure salaries and call themselves a 'CEO', when most of them hadn't even run a figurative lemonade stand before.

BadUglyMagic
11th May 10, 06:00 PM
How would you account for the massive capital losses that occurred drung the dot.com bust?

.


Sorry, I meant to suggest that many of the "investors" were "midddle class" wage-earners who thought they could make extra-ordinary income playing the IPO market and then lost most if not all of it.

The accounting was for the loss of that capital.



People just a few years out of school who were good at fronting in presentations were being handed millions and millions of pounds and allowed to pay themselves 6 figure salaries and call themselves a 'CEO', when most of them hadn't even run a figurative lemonade stand before.


It was the same here. It was good for those people. The MBA dream: concept, startup, IPO, and cash out. F any public responsibility.

BadUglyMagic
11th May 10, 06:12 PM
Too many possible points.

Cullion
11th May 10, 06:15 PM
Sorry, I meant to suggest that many of the "investors" were "midddle class" wage-earners who thought they could make extra-ordinary income playing the IPO market and then lost most if not all of it.

The accounting was for the loss of that capital.


There was a wealth transfer to the people they bought their overvalued stock from.

When people who were in on IPOs and seed and venture capital rounds lost out, the money just leaked away paying for the offices, Aeron chairs and salaries of the non-productive companies.

The people who made rather than lost money (and/or who still had access to large amounts of readily available low-interest credit) were then able to participate in the next asset bubble at the beginning. The people who start feeling flush at the end of the bubble-cycle (because 'working joes' like programmers and courier company drivers and telecomms installation guys start feeling a little flush now there's a lot of work around) are the most likely to get shafted when they try to buy in.

Is that inherently unjust? Not to a mean right-wing person like me.

My problem is that some of the participants have access to a, albeit carefully controlled, dollar-printing press when they went to take part in this game of musical chairs. I think, on average and over long periods, earned wealth is being skimmed by counterfeiters who take part in this process.

BadUglyMagic
11th May 10, 08:54 PM
My problem is that some of the participants have access to a, albeit carefully controlled, dollar-printing press when they went to take part in this game of musical chairs. I think, on average and over long periods, earned wealth is being skimmed by counterfeiters who take part in this process.



The above should be in your hypothesis. It would also be nice if a complete or relatively complete hypothesis were posted. Too much rudder, not enough sail.

Craigypooh
12th May 10, 04:23 PM
I demand sources.

http://en.wikipedia.org/wiki/Median_household_income

Note this article also answers the earlier question about what the shaded areas were in the first chart posted - recessions

Cullion
12th May 10, 07:14 PM
Median household income isn't what I want to use here for reasons stated earlier.

Truculent Sheep
12th May 10, 08:05 PM
Here's a stat for you all to ponder: US median family income has gone up by 127% since the early 80s, but university education in America has gone up by 375% during this period.* Combine that with the high price of property, and one sees the younger end of the middle class under increasing pressure.





* Warren Arbogast, ‘Technology in Higher Education: Planning for the Year 2028’, from The Future of Higher Education, ed. by Gary Olson & John W Presley, (Boulder: Paradigm Publishers, 2009) p. 127.

Ajamil
12th May 10, 09:43 PM
The price of university education, you mean?

Cullion
13th May 10, 05:14 AM
Yes, that's what he means.

Cullion
13th May 10, 05:20 AM
Hmm.. perhaps I should look at domestic resources with fewer inputs ? like land prices ?

BadUglyMagic
13th May 10, 09:47 AM
How about a shorter date range? Early-middle 60's to current?



Also, could you explain "access" and what the printing press is in the below?



"My problem is that some of the participants have access to a, albeit carefully controlled, dollar-printing press ".

EuropIan
13th May 10, 09:50 AM
He's talking about the Fed

Cullion
13th May 10, 09:51 AM
Yes, I'm talking about the Fed.

BadUglyMagic
13th May 10, 01:10 PM
Yes, I'm talking about the Fed.

Mmmmm.

Any closer to a completed hypothesis?

Cullion
13th May 10, 01:13 PM
I'm not going to condense all the posts into one long one for academic precision at the moment, I've got too much data to look for.

Feryk
13th May 10, 01:40 PM
I would encourage you to put it together at some point. This is an interesting question, and your methodology will be examined critically - especially if you are able to prove what you think is happening.

Cullion
13th May 10, 01:42 PM
I understand. I'm essentially treating this thread as an informal notebook that's exposed to quick feedback at the moment. Sorry if it makes it a more frustrating read.

Feryk
13th May 10, 01:50 PM
Not at all. Just at some point, I hoping to see something more formal. I really do wish you well with this. I think it's important.

BadUglyMagic
13th May 10, 02:05 PM
I'm not going to condense all the posts into one long one for academic precision at the moment, I've got too much data to look for.


To me, it seems that there are at least two different topics in your posts assignable in the posts related to the op. If you are writing a paper I understand a reluctance to reveal a completed hypothesis.

It would make it easier to make useful suggestions.

Cullion
13th May 10, 02:17 PM
I wasn't planning on writing a paper, but if I can make something solid out of this I won't be concerned about any kind of secrecy, because I have no plans to try and compete for academic accolades in Economics. If my idea is right, I'd rather tit just spread anonymously with the links, graphs and tables attached so people could check it for themselves.

Let me try and tie up these disparate topics for you. Tell me what are the different topics you see and I'll try and explain why I think they're related.

Feryk
13th May 10, 02:24 PM
Topic #1 - A rise in the inflation rate causes a real wealth transfer to a smaller group of wealthy people.

HappyOldGuy
13th May 10, 02:32 PM
Topic #1 - A rise in the inflation rate causes a real wealth transfer to a smaller group of wealthy people.

Specifically to people with greater access to the national banks. Since this all started off me suggesting that banks are -relatively- losers to inflation.

Cullion
13th May 10, 02:33 PM
Topic #1 - A rise in the inflation rate causes a real wealth transfer to a smaller group of wealthy people.

Not quite. I believe that monetary inflation even at a constant rate causes a wealth transfer to the people who get their hands on the new money earliest.

Feryk
13th May 10, 02:36 PM
So, if that is happening even with a constant rate, what happens when rates spike (1979-1983) or drop below zero (Japan)?

Is this a linear relationship (moar inflation = moar wealth transfer)?

Cullion
13th May 10, 02:44 PM
Japan's 'zero inflation' wasn't zero monetary inflation. They were printing money to prop up zombie banks, just like we are now. It's just that consumer prices didn't tick up because the new money was basically acting as a transfusion into those corporation's bleeding balance sheets instead of being translated into growth in the wider economy.

They were printing money to stop bankers who'd made mistakes from going bust. That money didn't make it's way into ordinary people's pockets much.

They call it 'the lost decade'.

Here's money supply growth in M2 for Japan from 1992 to 2004.

http://static.seekingalpha.com/uploads/2009/3/26/saupload_09_03_25d_us_japan_money_supply.png

Cullion
13th May 10, 02:55 PM
what happens when rates spike (1979-1983) or drop below zero (Japan)?

Is this a linear relationship (moar inflation = moar wealth transfer)?

Well, remember that I'm always talking about monetary inflation, not necessarily CPI or RPI inflation.

Want to find out whether moar monetary inflation leads to wealth transfer within this hypothesis?

Start counterfeiting $10 bills. Let's assume you have a magic power which means you never get caught.

Now, after you've printed a good sized batch of bills (that's the monetary inflation part), you spend them around town lavishly, and prices start to go up (that's the consumer inflation part). Eventually the people who work in the bars and car dealerships get raises from their bosses to reflect the price increases that they've already had to cope with on their old pay.

Eventually, the local economy reaches an equilibrium with the new money where prices and wages have all increased by just the proportion you added to the money supply. Let's say prices stabilised at around double.

You then decide to print ten times as much money for your next batch.

What happens ? (remember your magic power is still in operation).

i) Are the bar owners and car dealers pleased ? Does it depend how much money you print and who you spend it with first ?

ii) Are the bar staff and car dealership forecourt cleaning guy pleased ? (well, I suppose they'll eventually get a raise again.. but are they getting poorer or richer in real terms ?).

Feryk
13th May 10, 04:49 PM
i) the car dealers would initially love this as they get to charge higher prices for vehicles that they had already purchased in inventory. Of course, the new models would increase in price, so the effect would be temporary. Wages, taxes, etc. are trailing the inflation rate, so for a year or two, they might make more.

This assumes that demand remains constant, which it will not. Inflation means a loss in buying power for the average consumer. Cheaper, more fuel efficient cars will sell more than the higher margin fancy luxury vehicles. I would argue that over time, the car dealer will be squeezed, even if they benefit in the short term.

HappyOldGuy
13th May 10, 04:59 PM
Here is my problem with your analogy and the part you need to explain to me.

The bit you are leaving out is that the only thing you are allowed to do with your magic money is loan it out. That is an absolute restriction placed on institutions with access to the magic money tit. And since you can only loan it out, the value of your outstanding loans, the things you bought with the funny money, go down by exactly as much as you inflate the currency. You can't buy anything that will tend to appreciate with inflation.

Now where I think you may be able to find something is with the relationship between traditional deposit holding banks and investment banks and other less regulated entities. They can buy more diverse products with money you lend them. But they don't have direct access to the tit. They may however have privileged access. That's what I want you to convince me of.

Cullion
13th May 10, 05:18 PM
Here is my problem with your analogy and the part you need to explain to me.

The bit you are leaving out is that the only thing you are allowed to do with your magic money is loan it out.

That is an absolute restriction placed on institutions with access to the magic money tit. And since you can only loan it out, the value of your outstanding loans, the things you bought with the funny money, go down by exactly as much as you inflate the currency. You can't buy anything that will tend to appreciate with inflation.


Ah, but to whom are they allowed lend it ?

Do the institutions lend to each other for equity and private loan purposes ?

Are there strong walls between parts of those institutions which receive the money for lending, and the parts of those institutions which attempt to predict asset price movements with clients money ? Even at the board level?

Would knowing which sectors of the economy are about to be loaned money help one's equity teams make more astute predictions ? (of course it would). Would it be possible to pass on such information verbally, in private boardrooms, perhaps in the VIP box at a sports game, after church, or just whilst socialising, within a priviledged social class ? (of course it would, that's how human societies have functioned at the highest level for time immemorial).

Are the owners of these institutions sometimes involved in ownership of more than one institution?

These are the kind of questions I'm going to investigate after doing the groundwork showing harm occuring to the middle class.



Now where I think you may be able to find something is with the relationship between traditional deposit holding banks and investment banks and other less regulated entities. They can buy more diverse products with money you lend them. But they don't have direct access to the tit. They may however have privileged access. That's what I want you to convince me of.

Yes, I'd need to look at just the kind of questions I mentioned above

One of the problems is that there's no public record of exactly who the Fed gives money to, or how much. Nobody has the power of audit over the Fed, yet.

BadUglyMagic
13th May 10, 11:45 PM
One. Monetary inflation reduces the wealth of the middle-class and poor.

Two. The Fed secretly prints money and supplies it to financial organizations and extremely high value individuals to give them an advantage in buying assets that will later increase in price due to the monetary inflation.

The asset classes still haven't been identified.

Feryk
14th May 10, 11:35 AM
Update:

We have a Bloomberg terminal in the office, so I can get good data on this.

Current Dividend yield of the S&P 500 is 1.92, so it hasn't risen as predicted.

P/E Ratio is 16.83 as of today.

One could argue that this shows overvaluation, or that the market is optimistic about forward earnings, which have been beating expectations by and large. Make of that what you will.

Cullion
14th May 10, 12:05 PM
It's important to compare them against the alternative income yielding asset classes, with things like currency risks and bond default risks factored in.

Sometimes one thing is overvalued (relative to its historical norm) because the alternatives seem worse.

Cullion
16th May 10, 07:02 PM
I found a place with some apparently useful information called the Lincoln institute of Land Policy.

They've got a land-price index here:-

http://www.lincolninst.edu/subcenters/land-values/price-and-quantity.asp

I need to look more carefully at their methodology for this land price index to see if they're doing anything weird or if I've simply misinterpreted it.

I downloaded it and graphed their land price index against time. If this is kosher, then it shows land prices exploding way faster than population and median wages from the early 70s (Nixon broke the final link between the dollar and gold in 1971 which could be significant). It shows US land prices roughly doubling relative to the increase in the product of population and individual income from 1971 to 2000.

P.S. I didn't stretch the chart like that on purpose to make the increase look bigger, I just dumped it into paint and it came out like that.

Zendetta
18th May 10, 12:18 AM
Cullion, you might find it interesting to know (if you don't already) that Ron Paul's son Rand is about to win the republican nomination to run for senator in Kentucky.

Cullion
18th May 10, 04:44 AM
Yes, I heard Rand was involved, but hadn't kept up with how well he was doing. I don't think HOG would disagree with me if I said that the Fed needs to be under closer democratic scrutiny, and I'm sure Rand will support his father's crusade there.

There are people on the left and the right who are concerned about the way money-creation works, and they tend to have different solutions.

The left tend to be 'greenbackers' (after the Lincoln debt-free greenback) who still believe in fiat money but think it should be totally under democratic control, and issued for the construction of public works so that any new money finds it's way to the ordinary population's wages as directly as possible.

The right tend to think that allowing committees to create new money even with lots of oversight and good intentions is still dangerous, so they try to fix the money against gold or something similar).

I'm not really trying to support either proposed solution in this thread, I just think that what we have now is bad for us in the long run and am trying to document it.

BadUglyMagic
18th May 10, 09:17 AM
The right tend to think that allowing committees to create new money even with lots of oversight and good intentions is still dangerous, so they try to fix the money against gold or something similar).

.


How did you arrive at this conclusion?

Cullion
18th May 10, 09:21 AM
I'm talking about the paleo-conservative and libertarian anti-Fed right, not the mainstream right. The mainstream right largely didn't know where money comes from, much less have an opinion on this subject.

BadUglyMagic
18th May 10, 01:29 PM
I'm talking about the paleo-conservative and libertarian anti-Fed right, not the mainstream right. The mainstream right largely didn't know where money comes from, much less have an opinion on this subject.


Mmmm. That sentiment would apply pretty much across the political spectrum.

Cullion
18th May 10, 05:00 PM
Some in the the far left of North American politics (like Dennis Kucinich) share the same concerns, but as I say, they tend to favour 'greenbacking' as a solution.

The mainstream left in the UK were actually very concerned about this in the first half of the 20th century and that's why we nationalised the Bank of England right after WWII (an investigation was conducted which is still classified).

Cullion
22nd May 10, 12:14 PM
http://billpomerenk.com/travel/presidents/Andrew_Jackson/Andrew_Jackson.jpg


If the American people only understood the rank injustice of our money and banking system - there would be a revolution before morning..

Anyway, let's get back to some number crunching. Do we want to study land more, or are their other prices people think ought to be compared to median incomes ?

Would Harvard tuition or medical care costs be too complex a good ?

How about the cost of a dollar of income from the dividends of the Standard & Poor, or US treasury bonds ?

HappyOldGuy
22nd May 10, 12:31 PM
This is your exercise. Do whatever you think you can find numbers for. I think that college costs are going to be way too messy for your purpose, but if you think you can make your argument that way, feel free.

Hell I have friend who is a UC regent, and not even they understand exactly what has happened to costs.

You don't actually need to convince me about the loss of income by poorer americans. I'll happily stipulate that people below the median income level have gotten poorer over the last 30 years. But I would put the blame on that broadly on the decline of the US manufacturing, illegal immigration, and Reagan era union busting.

Cullion
22nd May 10, 12:44 PM
You're right that tuition costs have many inputs. I'm not sure whether or not that matters yet.

Median incomes have declined against land prices by a factor of ~2 after making a an admittedly simplistic adjustment for population growth since the early 70s though. Doesn't that tell you something about the real wealth represented by your wage ?

Cullion
22nd May 10, 03:49 PM
Let's look at this another way:

HOG, for the first part of my case (that median income is declining in purchasing power of certain domestic goods, especially capital assets), what else would you like to see ? What gaps do I need to plug in that part of the case ?

HappyOldGuy
22nd May 10, 04:39 PM
I don't have a problem with the basic notion that "broadly speaking" wealth is being funneled away from the middle and especially working class towards the wealthy. We can quibble about the amounts and details, but I'm unhappy to stipulate that is the case.

The part I don't see is how monetary inflation feeds into that. My contention is that monetary inflation is a broad tax that predominantly takes money away from the owners of fixed value financial instruments and gives it to the owners of appreciating assets.

Other than pensions, that mostly benefits the working class type folks. So I think that the reason why they have lost is the death of manufacturing, the loss of blue collar union jobs, illegal immigration etc. Not loose money policies at the fed.

So what I need to see is not the fact that the middle class has lost real purchasing power. I need to see how monetary policy figures into it.

Cullion
22nd May 10, 04:55 PM
Alright then. I'm going to have to start producing some credible sources showing how the money flows from the fed out into wider society. I'm going to try and show you how those land prices inflated away ahead of the product of median wage and population growth via inflationary mechanisms.

BadUglyMagic
22nd May 10, 10:42 PM
You're right that tuition costs have many inputs. I'm not sure whether or not that matters yet.

Median incomes have declined against land prices by a factor of ~2 after making a an admittedly simplistic adjustment for population growth since the early 70s though. Doesn't that tell you something about the real wealth represented by your wage ?


GAAAAAAHHHHH!!!!!!!!!

I'll have to pulll the explanation together but is it possible that the effects of illegal immigration and wage suppression may distort the way you are looking at price effects?

Note: From the previous census, my corner of the world had an illegal immigrant population of up to almost !,000,000 (mexian hispanic) out of a citizen population of 8,000,000. As a microcosm of the USA, the politics help make it a fascinating place.

BadUglyMagic
22nd May 10, 10:51 PM
I think the other issue would be that those who have "excess" saving beyond those necessary to maintain a basic living standard (whatever that is) will always have the opportunity to buy assests (investments) before those who have less or do not have savings.

The "weakness" with the argument is that the Fed somehow makes it worse. IMO behaviorally, it is personal behavior with regard to asset allocation that mkes the difference.

Yes, access to capital during times of inflation may give one an advantage with regards to assets purchase. Does it mean that there is a conspiracy or mechanism to intentionally give some priveleged persons an advantage? No.


Other than that, Rock on Dude!

Cullion
23rd May 10, 04:23 AM
I would've thought illegal immigration had an effect on wages substantially below the median.

HappyOldGuy
23rd May 10, 12:05 PM
I would've thought illegal immigration had an effect on wages substantially below the median.

There are alot of specific industries/segments that used to be well paying union jobs that used illegal labor to bust the union and drive the pay down to minimum wage levels. Meat packing is the textbook case.

Cullion
23rd May 10, 12:20 PM
When did that happen?

HappyOldGuy
23rd May 10, 12:27 PM
When did that happen?

Mid 80's-90's.

Cullion
23rd May 10, 12:33 PM
Is there any literature about this you can point me at?

I would need to know it's effect on median individual income over time.

HappyOldGuy
23rd May 10, 12:56 PM
Is there any literature about this you can point me at?

I would need to know it's effect on median individual income over time.
Nothing like that. There is tons of stuff written on the meatpacking change specifically, including some in Fast Food Nation, but I don't know anything that addresses the broader demographics. Googling for the effect on wages I found tons of links, but most of it was polemic by sites I wouldn't trust. Unfortunately it's a highly politicized debate which makes it tough to find good data.

BadUglyMagic
23rd May 10, 01:10 PM
^ That.

Gainesville, Georgia is one area where illegal aliens were/are employed. There was a lawsuit against the poultry industry. It should be googleable.

There are large parts of Gainesville where all the signs are in spanish. Much of the original (black and white) population working in the poultry industry was displaced and many have left the area.

The effect in Georgia will be greater because of the small state population.

Cullion
29th May 10, 03:32 PM
The 'union busting with immigrants' thing has fucked everything up with my argument until I can track down figures that I can try and isolate the effect with. I've drawn a blank so far.

BadUglyMagic
8th June 10, 03:45 PM
ping

Cullion
8th June 10, 03:58 PM
I think the other issue would be that those who have "excess" saving beyond those necessary to maintain a basic living standard (whatever that is) will always have the opportunity to buy assests (investments) before those who have less or do not have savings.



The "weakness" with the argument is that the Fed somehow makes it worse. IMO behaviorally, it is personal behavior with regard to asset allocation that mkes the difference.

The Fed allows some people to acquire the cash necessary the assets before others do. When the Fed increases the money supply, it doesn't credit the entire country's bank accounts by an even amount. The new money goes into a small group of hands.



Yes, access to capital during times of inflation may give one an advantage with regards to assets purchase. Does it mean that there is a conspiracy or mechanism to intentionally give some priveleged persons an advantage? No.

Yes, it does actually. Try and buy stock in the Fed. You can't. The Fed's owners represent a cartel.

BadUglyMagic
9th June 10, 12:45 PM
The Fed allows some people to acquire the cash necessary the assets before others do. When the Fed increases the money supply, it doesn't credit the entire country's bank accounts by an even amount. The new money goes into a small group of hands.


I am a little behind the times about monetary policy, please tell me how the Fed allows "some people" to acquire the cash.


By what means?


Please name the hands.


Also, I may have missed it, what are the asset classes purchased with this "cash"?



Actually the ping was to see where you are with the housing and income thing.

The model may be easier to build if you drop from the early 90's onward to allow for the changes in banking system (as a whole) lending policies and focus on a particular geographic area, Seattle, WA. and Atlanta, GA., come to mind. The Atlanta Fed should have excellent information and data to sift through.

The drop is to allow for the speculative expectation of real estate pricing during that time. Regionally (here) a person could reasonably make 20% or more annually by buying and selling real property. Yes, many did so with 0% - 5% down. That is another thread.

Cullion
9th June 10, 03:22 PM
I am a little behind the times about monetary policy, please tell me how the Fed allows "some people" to acquire the cash.

By making loans to it's shareholders and other banking institutions at rates that aren't available to everybody else, and by monetary policy overall being decided by people who were appointed by private shareholders. (The US president only gets to choose the Chairman of the Federal Reserve board off a shortlist given to him by the regional Federal Reserve Banks, which are privately owned by top tier banks).



By what means?

See above.



Please name the hands.

The stockholders of the regional Feds in the main. No public body currently has the power to audit the Fed, so it's not possible to say which private institutions or they made loans to or assets they purchased, say, last month.



Also, I may have missed it, what are the asset classes purchased with this "cash"?

All kinds of financial instruments.



Actually the ping was to see where you are with the housing and income thing.

I know, but I saw you had unanswered questions from before.



The model may be easier to build if you drop from the early 90's onward to allow for the changes in banking system (as a whole) lending policies and focus on a particular geographic area, Seattle, WA. and Atlanta, GA., come to mind. The Atlanta Fed should have excellent information and data to sift through.
The drop is to allow for the speculative expectation of real estate pricing during that time. Regionally (here) a person could reasonably make 20% or more annually by buying and selling real property. Yes, many did so with 0% - 5% down. That is another thread.

I think speculative pricing should be part of the model, because we're talking about how credit bubbles percolating through the banking system into real asset prices undermining middle and working class earning power here. The wider the area I can cover operating under the same currency I can cover, the better, I think. Out of all the regional Fed boards, I found the St Louis Fed to publish the widest range of detailed stats about the national economy.

BadUglyMagic
27th June 10, 11:09 AM
Bump.

Ajamil
27th June 10, 02:46 PM
I guess we'll never find out whether Cullion could prove his thesis.

BadUglyMagic
27th June 10, 09:00 PM
That would be too bad. He didn't bother to respond to a pm. I had some small additional information he could use for his conspiracy theory.

Kiko
28th June 10, 06:21 AM
So then... the middle class is safe from all this?

*ducks and runs*

BadUglyMagic
28th June 10, 09:52 AM
*ducks and runs*



*serpentine, serpentine*

Kiko
28th June 10, 09:58 AM
Do I fall down? Someone gimme a hint...

Feryk
28th June 10, 04:13 PM
So then... the middle class is safe from all this?

*ducks and runs*

Yes, perfectly safe until Cullion tells us differently.

In truth, it's a pretty damn ambitious project for someone with just a casual interest.

Plus, he's from Oxford, so you know....:biggrin:

BadUglyMagic
28th June 10, 08:50 PM
Yes, perfectly safe until Cullion tells us differently.

In truth, it's a pretty damn ambitious project for someone with just a casual interest.

Plus, he's from Oxford, so you know....:biggrin:

"From" or an "Oxford graduate"? That may explain his occasional insane need to debate for the fun of it.

HappyOldGuy
28th June 10, 08:53 PM
"From" or an "Oxford graduate"? That may explain his occasional insane need to debate for the fun of it.

The latter. Although possibly the former too. I think he's from that part of the country at least.

Feryk
29th June 10, 11:57 AM
He's an Oxford grad, don't know enough about English geography to say where he is from...but it explains his need to take a position and hold it in the face of any and all logic.

BadUglyMagic
30th June 10, 10:54 PM
I am beginning to think we wuz trolled.

HappyOldGuy
30th June 10, 11:06 PM
I am beginning to think we wuz trolled.

In this thread or in general. I think in this one he just realized the magnitude of what he was attempting and the difficulty he was gonna have getting the data he needed.

On the whole "Cullion goes off the deep end" part, yeah, that's some under the bridge material.

BadUglyMagic
1st July 10, 07:44 AM
I'm really just teasing Cullion and his lack of response.

From his the op: "I believe that, in the long term, inflation of the money supply transfers real wealth from the 'median average' member of the population towards the wealthiest fraction who have 'first use' access to that new money."


Would have been easier if he had focused on specific behaviors regarding the Fed for money supply and creation mechanisms and consequent introduction into the economy using a limited geographic area over a smaller timeframe.

But hey, I'm all for overcomplicating things too.


I should add that for a growing economy, a growing money supply/credit market is generally a good thing. For a stagnant economy, not so good.

Craigypooh
1st July 10, 01:25 PM
this paper looks at UK salary inflation as well as price inflation data for a number of countries:

http://www.inqa.com/files/Conferences/MoreOnAStochasticAssetModel1995BAJ1.pdf

BadUglyMagic
1st July 10, 02:52 PM
"'median average' member of the population towards the wealthiest fraction"


Probably should have mentioned that using a "median average" against a specific numbered percentage would not necessarily yield the most accurate results.


Did Cullion bail on the site? What are the rumors?

Kiko
1st July 10, 03:03 PM
I think all the drama behind his supposed self exile is a cover for not being able to fix the world economy.

BadUglyMagic
1st July 10, 07:30 PM
I think all the drama behind his supposed self exile is a cover for not being able to fix the world economy.


Aaahhhh, I see, though for a simple programmer from the wudan he assumes too much responsibility.

HappyOldGuy
1st July 10, 08:11 PM
If you come back big C, take a gander at this and see if it refocuses you,

http://www.washingtonpost.com/wp-dyn/content/article/2010/06/30/AR2010063004199.html

I think we both agree with him on the importance of manufacturing. Or at least on the relative unimportance of financial services. He doesn't talk much about root causes, but I personally think that his examples point away from a purely monetary issue, and hint at some of the perverse incentives that I want some bright oxford educated boy to ferret out and bring into the daylight.

Cullion
10th July 10, 11:34 AM
Would have been easier if he had focused on specific behaviors regarding the Fed for money supply and creation mechanisms and consequent introduction into the economy using a limited geographic area over a smaller timeframe.

Well, I think I have to demonstrate the harm actually occurs before attempting to demonstrate the monetary mechanisms by which I think the harm occurs.

So far, I've managed to establish that since Nixon closed the Gold window, Land prices in the US have increased much faster than the product of population growth and median income growth. Had I been looking at prices and incomes in a smaller geographic area, the conclusion would be prone to enormous uncertainties related to local economies.

Imagine if I'd been trying to deduce something about the effect of monetary policy just by looking at Detroit, or Vegas, for example ?

As it is, I have a harder job tracking down some of the stats I need, but at least I can work with averages over time which apply to the entire geographic area in which the US dollar is legal tender. I think this helps filter out some noise like 'we just discovered gold here' or 'the federal government just built a huge research facility next door'.



I should add that for a growing economy, a growing money supply/credit market is generally a good thing.

If the Fed grew the money supply at the same rate at which the overall supply of goods and services expanded, there would be no inflation. As it is, the dollar has lost over 90% of it's purchasing power since the Fed was founded. It's my contention, still to be demonstrated, that the new dollars do not get spread homogenously through the population, but that money creation benefits those who get their hands on the money soonest.

Actually, if we were discussing a counterfeiting ring, there would be absolutely no argument on this point. It would be intuitively obvious to you that the counterfeiters would be getting richer without producing any real goods or services, and hence impoverishing everybody else as price levels rose due to the new money in circulation.

But I understand that once I start attacking a massive national institution (that most people mistakenly believe to be a governmental body), I have a heavy burden of proof. I'm essentially trying to tell you that something you grew up accepting as a national institution is basically a front for a sophisticated crime syndicate so successful that they've managed to make their crimes legal (but only for them. You aren't allowed to pull the same thing).

Next I'm going to examine the cost of acquiring a dollar of yield income from the Dow, and from Treasury bills, relative to median salary, over time.

P.S. I didn't grow up in the Oxford area. I'm from the East Midlands. S'only a couple of hours drive away but in UK terms that means I have a completely different accent that's clearly 'not from around here'. In the UK people who live an hour's drive apart can have accents as different as, say, the New York and the Texas accent.

Cullion
10th July 10, 11:44 AM
P.S. I still haven't gotten my teeth into the point HOG made about migrant labour being used to suppress certain wages one way or the other. I agree that it happens (and the big employers have lobbied the state into making us all subsidise it whilst labelling dissent as 'racism'), but I think it's another input to the economy.

I believe it's both possible and likely that both explanations are true. Real economies are made up of lots of factors.

BadUglyMagic
10th July 10, 07:52 PM
Well, I think I have to demonstrate the harm actually occurs before attempting to demonstrate the monetary mechanisms by which I think the harm occurs.

So far, I've managed to establish that since Nixon closed the Gold window, Land prices in the US have increased much faster than the product of population growth and median income growth. Had I been looking at prices and incomes in a smaller geographic area, the conclusion would be prone to enormous uncertainties related to local economies.

Imagine if I'd been trying to deduce something about the effect of monetary policy just by looking at Detroit, or Vegas, for example ?

.


Well, you could.

Where did you do paragraph two? I do not remember the information or summaries.


Nice to have you back.

Cullion
11th July 10, 03:12 AM
I dug up that info in this post here http://www.sociocide.com/forums/showpost.php?p=1547257&postcount=87

BadUglyMagic
11th July 10, 02:35 PM
P.S. I still haven't gotten my teeth into the point HOG made about migrant labour being used to suppress certain wages one way or the other. I agree that it happens (and the big employers have lobbied the state into making us all subsidise it whilst labelling dissent as 'racism'), but I think it's another input to the economy.

I believe it's both possible and likely that both explanations are true. Real economies are made up of lots of factors.


In general, it lowers wages in a local/regional way for the industry(ies) and to a possibly lesser effect on wages in the secondary industires or those serving the citizens and newer workers. Restaurants, construction, etc.

It is not just the bigger businesses that benefit from the labor.

It is both a cost and a contributor to the economy.

The citizen workers are effectively displaced and go somewhere else. The basic effect is a cost reduction to the to the employer. The jobs still exist, just at a lower hourly pay rate.


Go Spain!

Cullion
11th July 10, 03:34 PM
Yes, I know all that. But I haven't yet quantified the effect to see whether or not it can entirely explain the failure of median wages in the US to keep up with the prices of certain capital goods.

HappyOldGuy
11th July 10, 04:20 PM
The biggest hits to sub median wages were:

1. The collapse of american heavy industry.
2. The destruction of american unions.
3. Illegal immigration (specific to industry segments, but if you look at light manufacturing, non commercial construction, meat packing, etc, the effect is massive. Usually in combination with union busting.)

But number one is the 800 pound gorilla. I think it's possible that monetary policies could have fed into that, but if they had an effect I would expect it would be tight dollar protecting policies that would have caused the damage.

Cullion
11th July 10, 04:48 PM
These are important points, that need quantifying. I haven't found any numbers yet.

I want to carry on establishing that certain important asset classes have outstripped wages. It could well be the case that middle-class Americans have in some important sense been getting poorer and it not be a monetary thing.

How about you dig up numbers to quantify the above, and I'll look up the next asset class (cost of a dollar of income from investments).

BadUglyMagic
12th July 10, 09:13 AM
The biggest hits to sub median wages were:

1. The collapse of american heavy industry.
2. The destruction of american unions.
3. Illegal immigration (specific to industry segments, but if you look at light manufacturing, non commercial construction, meat packing, etc, the effect is massive. Usually in combination with union busting.)

But number one is the 800 pound gorilla. I think it's possible that monetary policies could have fed into that, but if they had an effect I would expect it would be tight dollar protecting policies that would have caused the damage.


Good points.

Part of the collapse of heavy (manufacturing) industry and the loss of theose jobs (union and non-union) was effected by over-regulation and over-taxation by gov't entitites. Fwiw, I believe taxation and regulation are necessary and not necessarily evils.


Have you looked at right-to work states? To make sure I am on the same page, will you give your definition of union-busting?

Cullion
12th July 10, 02:38 PM
The effect whereby growth in land prices outstrips incomes is still visible when looking at incomes of white collar professions requiring advanced academic study:-

http://ewh.ieee.org/cmte/pa/Status/salary/Image23.gif

Nominal wages have increased by a factor of 5. Population increased ~40%

Land prices over the same period increased by a factor of ~14.

IEEE engineers aren't displaced by illegal immigrants, and their rate of unemployment is considerably lower than it was in 1971.

I don't believe the discrepancy between their salaries and land price inflation can be accounted for by illegal immigration or union busting, although it may be a result of legal immigration (although the lower unemployment rates would suggest that competition for professional engineering jobs isn't as tough in 2000 as it was in 1971).

I think there's another factor at work in degrading the American middle-class' ability to acquire capital, but I certainly haven't fully described or demonstrated this degradation yet, and I really need to get back to that before I try and demonstrate the mechanisms.

Dr. Socially Liberal Fiscally Conservative Vermin
12th July 10, 02:41 PM
Could you explain that graph for me Cullion?

What does 'Real 2000 Dollars' mean?

Cullion
12th July 10, 02:44 PM
That's when you adjust all the salary figures each year by an inflation measure (CPI in this case).
Normally economists do this to try and compare 'like with like', but you can ignore it for the sake of this argument, we're only interested in actual (nominal) wages and prices.

What I'm essentially doing is picking the standard inflation composites to pieces to try to show how the American middle class is basically getting poorer (in terms of their incomes relative to several important capital goods, things like land and income yielding investments) year on year because of the way their banking system works.

The common inflation stats don't represent this because the 'basket of goods' they're made up of are full of imported consumer goods which are extremely cheap because they're produced by people working in conditions that would be illegal in most of the West.

I'd like to include the costs of things like a college education, which also has outstripped their salary growth, but that's more complex because there are so many inputs affecting the price of that. I may attempt it later on.

Feryk
12th July 10, 04:11 PM
Could you explain that graph for me Cullion?

What does 'Real 2000 Dollars' mean?

For purposes of this discussion, the thing to focus on is that land prices have risen 1400% since 1971 and wages for this group have only increased 500%.

And these are well educated people who are not easily displaced by technology, nor influenced by union busting, etc.

It's a very good indicator that even white collar professionals are losing earning power relative to land prices.

Cullion
12th July 10, 04:13 PM
Population increased 40% during this period, so although the product of population growth and nominal salary growth is only about 700%, I could simply be underestimating the price elasticity of land as population density increases with this simplistic formula.

That's one of the reasons I need to look at other capital goods.

Feryk
12th July 10, 04:14 PM
Remember in the US pop. density isn't as much of a factor as it is in most of Europe.

In selected cities it will be, but not most of the country.

Cullion
12th July 10, 04:20 PM
I know, but I'd rather look at other capital goods with relatively simply inputs than try and make a detailed statistical analysis of the price elasticity of American real estate.

A broader range of goods also tells you something more useful about how family finances have changed over time.

BadUglyMagic
12th July 10, 04:46 PM
The effect whereby growth in land prices outstrips incomes is still visible when looking at incomes of white collar professions requiring advanced academic study:-

IEEE engineers aren't displaced by illegal immigrants, and their rate of unemployment is considerably lower than it was in 1971.

I don't believe the discrepancy between their salaries and land price inflation can be accounted for by illegal immigration or union busting, although it may be a result of legal immigration (although the lower unemployment rates would suggest that competition for professional engineering jobs isn't as tough in 2000 as it was in 1971).


Nominal wages have increased by a factor of 5. Population increased ~40%





Technology. Look at the state of computing and the number of engineers (of whatever type) required for any mid to large scale project in 1971. Look at
the number required now.

Why choose engineers? The general population of engineers increased 40%? What about using entry-level, 5, 10 and 15 year incomes for engineers?

The graph only represents members of that engineering society( Institute of Electrical and Electronics Engineers). As such there is the possibilty the graph numbers may be restrictive.

BadUglyMagic
12th July 10, 04:50 PM
I know, but I'd rather look at other capital goods with relatively simply inputs than try and make a detailed statistical analysis of the price elasticity of American real estate.

.


Are you dropping land from the asset classes?

Cullion
12th July 10, 04:50 PM
Engineers were the first I came across.

Technology doesn't explain it because they don't have an increased unemployment rate compared to 71, they have a decreased unemployment rate compared to 71.

IEEE member engineers did well relative to other middle class groups during the 90s (the last data point is 2000, height of the dotcom boom).

Cullion
12th July 10, 04:51 PM
Are you dropping land from the asset classes?

No, I'm just not going to do a deeper statistical examination of it's price elasticity right now.

Feryk
12th July 10, 05:03 PM
I know, but I'd rather look at other capital goods with relatively simply inputs than try and make a detailed statistical analysis of the price elasticity of American real estate.

A broader range of goods also tells you something more useful about how family finances have changed over time.


So, are you thinking one of the CPI 'baskets of goods'?

Because everything has elasticity of price in nominal dollars.

Cullion
12th July 10, 05:15 PM
I'm going to be looking primarily at big ticket domestically produced goods and capital goods which one purchases to increase family wealth/become less economically reliant on a corporate employer.

Land.

Cost of a dollar of income in yield from the Dow or S & P 500.

Cost of a dollar of income from Treasury bonds.

Cost of tertiary education.

Healthcare costs of specific procedures, such as the median cost of delivering a baby.

Cost of incorporating.

Proportion of taxes paid by adult on median income swallowed by debt interest (i.e. not returned in the form of services of any utility to the taxpaying public).

My hypothesis is that the American middle class are on a steady slide towards ever reducing economic self-sufficiency (i.e. becoming more beholden to lines of credit, corporate employment and government transfers) which is partly masked by the reduced price of many consumer goods which are now made by people much closer to serfdom (i.e. the reason things don't look so bad when you focus on CPI), and that a substantial part of the blame for this is that the heartbeat of the US economy is controlled by a sophisticated cartel that doesn't actually produce any useful goods.

Dr. Socially Liberal Fiscally Conservative Vermin
13th July 10, 05:22 AM
There is nothing left now for us but to get ever deeper and deeper into debt to the banking system in order to provide the increasing amounts of money the nation requires for its expansion and growth.

BadUglyMagic
13th July 10, 10:11 AM
A pizza called SuperduperDeluxeLuxeGrandeBigTuna has a complicated recipe and does not necessarily make for a tasty treat.

Cullion
13th July 10, 12:55 PM
No, but we aren't making a pizza.

Your proposed method will be a good way of showing specific examples of the mechanism at work, but broader groundwork needs to be put in place to defend the theory from criticisms like :-

'that's not monetary, it's just that Vegas had a boom in year X'

or

'California salaries have been effected by the dotcom crunch and the effect of piracy on the movie industry, it's got nothing to do with the Fed'.

Your approach will be useful later, when we start examining specific transfers between the Fed and Banks.

BadUglyMagic
13th July 10, 02:51 PM
I'm going to be looking primarily at big ticket domestically produced goods and capital goods which one purchases to increase family wealth/become less economically reliant on a corporate employer.

Land.

Cost of a dollar of income in yield from the Dow or S & P 500.

Cost of a dollar of income from Treasury bonds.

Cost of tertiary education.

Healthcare costs of specific procedures, such as the median cost of delivering a baby.

Cost of incorporating.

Proportion of taxes paid by adult on median income swallowed by debt interest (i.e. not returned in the form of services of any utility to the taxpaying public).

.


Historically what have been the asset classes the median Americans purchase to increase family wealth/become less economically reliant? These assets must be consistent from the beginning of the specified time period.


Land - No I don't want to go there now either.

Cost of $1.00 income yield from the Dow or S&P 500. - How will you factor in changes and expectations regarding average investor behavior over time? imo, In the last 20 or so years, the perception of how income is "made" in the stock market seems to have changed from dividend income from equities to income streams from sales of appreciated stocks.

Cost of $1 income from Treasury bonds. - How are the differences in application of monetary policy accounted for over the analysis timespan?

Cost of tertiary education - Nice.

Healthcare costs of specific procedures. - It may add some value to look at the overall structure of the industry. Cost/pricing summaries even by individual state may not provide a good fit.

Cost of incorporating. - ?

Proportion of debt interest - Me likey.

Feryk
13th July 10, 03:47 PM
Cost of $1.00 income yield from the Dow or S&P 500. - How will you factor in changes and expectations regarding average investor behavior over time? imo, In the last 20 or so years, the perception of how income is "made" in the stock market seems to have changed from dividend income from equities to income streams from sales of appreciated stocks.

Cost of $1 income from Treasury bonds. - How are the differences in application of monetary policy accounted for over the analysis timespan?

With respect to the first one, it isn't really relevant, IMO. The question is what the cost of yield is, not whether or not Americans are busy actively trading and looking for cap gains instead of yield.

I'm not sure what you are after with the second one...why would a change in monetary policy be relevant here?

BadUglyMagic
13th July 10, 04:20 PM
With respect to the first one, it isn't really relevant, IMO. The question is what the cost of yield is, not whether or not Americans are busy actively trading and looking for cap gains instead of yield.

I'm not sure what you are after with the second one...why would a change in monetary policy be relevant here?


Cullion's hypothesis deals with the median American's ability to acquire assets that will allow an economic freedom to oh, say retire.

It also looks at the decline of asset wealth or ability to acquire these assets by median Americans due to inflation.

One is an economic rent, the other is income from the sale of an income producing asset. Over time the economic rent is less of an incentive to owning the equity than the expectation of an economic gain (income from profit) on the sale the asset itself.


The changes are relevant in that expansionary monetary policies (increases in the money supply) cause interest rates to fall and the price of bonds to increase.

Cullion
13th July 10, 05:20 PM
Historically what have been the asset classes the median Americans purchase to increase family wealth/become less economically reliant? These assets must be consistent from the beginning of the specified time period.

Land, education, real estate, equity (either on open exchanges or invested in personal entrepeneurial activity), bonds.



How will you factor in changes and expectations regarding average investor behavior over time? imo, In the last 20 or so years, the perception of how income is "made" in the stock market seems to have changed from dividend income from equities to income streams from sales of appreciated stocks.

I agree with that point completely, and I think it's a bad thing for people on median incomes to attempt. I'll explain why later.



Cost of $1 income from Treasury bonds. - How are the differences in application of monetary policy accounted for over the analysis timespan?

Could you clarify this point please ?

BadUglyMagic
13th July 10, 06:35 PM
Land, education, real estate, equity (either on open exchanges or invested in personal entrepeneurial activity), bonds.




I agree with that point completely, and I think it's a bad thing for people on median incomes to attempt. I'll explain why later.



Could you clarify this point please ?




Quote:
Cost of $1 income from Treasury bonds. - How are the differences in application of monetary policy accounted for over the analysis timespan?

Could you clarify this point please ?



Could have been better phrased.

Some of the periods (inclusive of different economic cycles) had changes in both monetary and fiscal policies.

It is a long time period. Over time, things smooth out. Is there a particular approach you are using to account for those cycles? Taking into account the relevant monetary and fiscal policies in effect during that cycle?

Cullion
13th July 10, 06:41 PM
I'll be looking at the yield on the bonds relative to a measure of monetary inflation (not CPI inflation).

Cullion
16th July 10, 02:51 AM
Just making some notes on the cost of a dollar of income from equities

S & P 500

http://www.tradersnarrative.com/wp-content/uploads/2008/10/sp500%20price%20dividend%20ratio%20long%20term%20c hart.png

Dow

Large image

http://3.bp.blogspot.com/_i47TEqZoAbw/S66zgp5AaGI/AAAAAAAAAig/THmyuCYJOfY/s1600/Dow+Price-Dividend+Ratio+History.jpg

Cullion
16th July 10, 02:52 AM
I need to research the differences between the Dow and the S & P, but clearly American companies are becoming a less promising source of investment income for non-speculators as time goes on. The volatility and real thinning-out of dividends both seem to really take off from about 1970, when Nixon closed the gold window.

BadUglyMagic
16th July 10, 07:10 AM
I need to research the differences between the Dow and the S & P, but clearly American companies are becoming a less promising source of investment income for non-speculators as time goes on. The volatility and real thinning-out of dividends both seem to really take off from about 1970, when Nixon closed the gold window.


Have been.

Will you be able to quantify the change in investment behavior due to changes in the laws governing te market and investments and the subsequent affect on investments over the effective start dates?

Also, you may want to consider the elastcity of demand bewteen investment ypes given the change from stock market speculation to real estate speculation. Within that part of the equation, there are regional differences in that at te near peak of the real estate "bubble" there were part s of te country with negative price trends.

Land, equities and bonds.

What program are you usng to build your equation/model?

BadUglyMagic
16th July 10, 03:34 PM
Also, over the time span it may be helpful to look at the populations of farm and non-farm workers and the change of those populations. Additionally, as available look at the numbers for service and manufacturing employment.

Cullion
16th July 10, 03:59 PM
Have been.

Will you be able to quantify the change in investment behavior due to changes in the laws governing te market and investments and the subsequent affect on investments over the effective start dates?




Also, you may want to consider the elastcity of demand bewteen investment ypes given the change from stock market speculation to real estate speculation.

Yes, Monetary bubbles are like a game of musical chairs. The new money moves through different asset classes looking for returns until it can't find any. We've had several of these cycles over the period so far charted and they're of shorter wavelength than the kinds of trend I'm looking for.

See the extreme volatile noise in the dividend yield charts for entire stock indices? That's money sloshing in and out of equities. See the longer-term underlying trend towards a less generous dividend yield ? That's what I'm interested in.



Within that part of the equation, there are regional differences in that at te near peak of the real estate "bubble" there were part s of te country with negative price trends.

I'm totally ignoring regional differences by looking at averages for the entire geographic area in which the Federal Reserve notes are legal tender at present. That was always my intent at this stage.



What program are you usng to build your equation/model?

Nothing yet.

BadUglyMagic
16th July 10, 04:10 PM
Yes, Monetary bubbles are like a game of musical chairs. The new money moves through different asset classes looking for returns until it can't find any. We've had several of these cycles over the period so far charted and they're of shorter wavelength than the kinds of trend I'm looking at.


Uh, not part of paragraph context. All money moves through the asset classes.

to me, "Monetary bubbles suggests monetary policy. Is that the intention or would " speculative asset price bubbles" or "inflationary monetary policy asset price inflation" better reflect what you had in mind?




I'm totally ignoring regional differences by looking at averages for the entire geographic area in which the Federal Reserve notes are legal tender at present.


I am soooo smiling at that explanation.



Nothing yet.


Uh, uh, mmm, uh, okay.

Cullion
16th July 10, 04:13 PM
Uh, not part of paragraph context. All money moves through the asset classes.

Umm.. that's what I just said.



I am soooo smiling at that explanation.

What bothers you about it?



Uh, uh, mmm, uh, okay.

Dude, there's not enough here to write any useful equations yet. What's the point ?

BadUglyMagic
16th July 10, 04:23 PM
PM to Cullion

BadUglyMagic
16th July 10, 04:28 PM
Umm.. that's what I just said.



What bothers you about it?



?


Sorry,

It was the term "new money" which I understood to be the cheaper pre-inflation dollars received by the priveleged class from the FED.

Not a bother, I like it. If you said you worked for a gov't PR office (edit to add) I would believe it.

Cullion
16th July 10, 04:36 PM
Well, most of the money in circulation today started out as 'new money' created by the Fed from thin air.

Basically I think the final 'resting place' of new money is in working class salaries. The broad populace of working stiffs are generally the last people in the cycle of asset-bubbles to get their hands on it.

Cullion
19th July 10, 06:43 PM
World oil supply (thousands of barrels per day) since 1970

http://www.onlineopinion.com.au/images/article-images/amin_world_oil_supply.gif

World oil consumption (billions of barrels per year) since 1970

http://www.arabianbusiness.com/blogs/images/2009/06/world-oil-consumption-2008.jpg

Consumption has increased about 50% since 1970. But so has oil production.

The balance between supply of and demand for real barrels of oil is almost unchanged between 1970 and 2000.

But what's happened to the price if you're paying for it in US dollars?

Nominal Oil price in dollars since 1970.

http://image.absoluteastronomy.com/images/encyclopediaimages/o/oi/oil_price_chronology-june2007.gif

The value of your dollar (when purchasing oil) has devalued way faster than your wages have increased. Even in really cheap years, it's 20-30x in actual dollars what it cost before Nixon closed the gold window. We're talking about thousands of percentage points even in cheap years.

And it's not because oil is more scarce. The balance between oil production and oil consumption has hardly changed over this period.

Why can't the American median wage keep up with the price of oil?

Cullion
19th July 10, 06:54 PM
To restate what's been found so far.

The median American wage cannot keep up with the price of land or the price of oil (spectacularly so in the latter case), and trying to invest for the future in US companies is increasingly reliant on casino-like speculation rather than steadily reaping a yield from economic progress in dividend payments. In the long term, US companies are becoming increasingly less rewarding for ordinary Americans to invest in.

This effect is very clearly apparent even when we examine the incomes over the same period of professionally educated IEEE members (high-tech professionals) who haven't been affected by union busting measures or subject to competition from illegal immigrants.

Feryk
19th July 10, 07:16 PM
So then, what is the middle class American to do?

How can they build their wealth sufficiently?

HappyOldGuy
19th July 10, 09:08 PM
This effect is very clearly apparent even when we examine the incomes over the same period of professionally educated IEEE members (high-tech professionals) who haven't been affected by union busting measures or subject to competition from illegal immigrants.

I missed a link, I would like to see this.

Cullion
20th July 10, 05:14 AM
I missed a link, I would like to see this.

It's this post here http://www.sociocide.com/forums/showpost.php?p=1565100&postcount=141&b=4

Shows nominal salaries for IEEE members increasing by a factor of 5 whilst land prices increased by a factor of 14.

Population grew by about 40% over that period, so land prices grew at about twice the rate of the product of income and population. Oil prices outstripped IEEE member salaries by a factor of ~5-10, despite consumption and production remaining in a relatively stable balance.

Feryk
20th July 10, 10:58 AM
Okay, you've found evidence that supports your theory.

Now, how 'bout things that might poke holes in it? Are there any commonly consumed goods that became more affordable by the average family during that time? (I'm thinking technology, food, etc.)

Cullion
20th July 10, 12:05 PM
Well, I haven't supported the theory yet. So far, I've made progress demonstrating the first part, that a form of economic harm has occurred. I haven't yet demonstrated why it's happening (although we've seen that it's happening to skilled professionals who aren't so affected by union busting, or displaced by illegal immigration).

To answer your question. there are lots of goods which became more affordable for the median individual over the time period. These things got cheaper because:-

i) Advancing technology makes them cheaper to make

and/or

ii) They're imports from where lower wages/less worker protection make them cheaper to make.

I don't believe these things poke holes in the theory, because I expected them in the first place.

Cullion
20th July 10, 01:07 PM
Education costs:

In 1970, Harvard tuition was $4,070 a year.

By 2006 it cost $33,709*

It's actually not as bad as for land or oil, but an elite education has outstripped IEEE professional or median American salary growth too.

* The Harvard Crimson http://www.thecrimson.com/article/2006/10/25/tuition-increase-outpaces-inflation-tuition-hikes/

HappyOldGuy
20th July 10, 10:26 PM
Hmm, I think there is a problem with the way one of us is reading the land price data. The PI looks like it has gone up about 3-4 times.

However this one (http://mysite.verizon.net/vzeqrguz/housingbubble/) is showing a good 7x increase in home prices, and a couple I googled were even higher. I think if you add in the increased square footage you can still at least say that inflation has eaten up any gains that they made on housing. And that's a little higher up the food chain than I would have expected you to be able to make that claim.

Cullion
21st July 10, 05:03 AM
Hmm, I think there is a problem with the way one of us is reading the land price data. The PI looks like it has gone up about 3-4 times.

The data set I used when I made my assertion about land prices was 'Decennial Census of housing-based price index, aggregate land data, annual 1930-2000' on this page http://www.lincolninst.edu/subcenters/land-values/price-and-quantity.asp&b=4

The land price index in 1970 was 0.060559667 (1 being 2000). This means land prices increased by a factor of 16 over the period 1970-2000 according to that dataset.

BadUglyMagic
21st July 10, 01:01 PM
As this exercise is to looks to show (in part) that expanionary montary policy is responsible for growth in consumer prices thus affecting the median US consumer.

Please look at the inclusion of oil in the basket of commodities. There may be a large variance beyond any associated with monetary policy in part due to 1. Changes in the producer market (slower growth in number of active wells, regulations, creation of oil cartels), 2. Consolidation of the large oil companies serving the US domestic market, 3. Closing of existing refineries without replacement, 4. Fewer refineries allowing companies (BP and others) to extract oligopolic price premiums from consumers.

It is important to note that while most of the above starts in the early seventies, how will it be accounted for?


Land: Still don't want to go there.

Cullion
21st July 10, 03:27 PM
The hypothesis I'm seeing if I can turn into a theory is just slightly different than that:-

it's 'monetary expansion is significantly responsible for prices of goods important for economic self-sufficiency and/or social mobility growing faster than median incomes'.

This is more controversial then the one you've put forward, which is pretty widely accepted, but generally not seen as a harmful thing to the general population as long as it occurs at a steady pace. It's a cornerstone of Keynsian theory to maintain a certain velocity of money.

The fact that a single good may be affect by consolidations of the kind you subscribe is the reason why I'm taking a broad sweep across so many in order to demonstrate the 'harm to the median' part of my case.

BadUglyMagic
21st July 10, 04:37 PM
The hypothesis I'm seeing if I can turn into a theory is just slightly different than that:-

it's 'monetary expansion is significantly responsible for prices of goods important for economic self-sufficiency and/or social mobility growing faster than median incomes'.

This is more controversial then the one you've put forward, which is pretty widely accepted, but generally not seen as a harmful thing to the general population as long as it occurs at a steady pace. It's a cornerstone of Keynsian theory to maintain a certain velocity of money.

*The fact that a single good may be affect by consolidations of the kind you subscribe is the reason why I'm taking a broad sweep across so many in order to demonstrate the 'harm to the median' part of my case.


I did say, "in part". The monetary inflation part has to do with prices of goods of economic self-sufficiency and some of the rich get richer and the middle and lower incomes get poorer.


* The concern is that much of the rise in price for this commodity is not so much the effect of money supply expansion but caused by producer/distributor actions.

imo, it introdcues a possibly small but certainly material difference to the outcome.

It certainly affects upwards the prices of consumer goods that use the products made from oil. Plastics, electronic components, etc.


add edit:

of course, an argument could be made that the producer/distrubtors had to:

1. Buy out/merge with others as a way to raise earning/increase market share as a coping mechansim to the effects of inflation.

2. Close refineries/not build any more refineries to decrease available output capacity thus lwering on-hand inventory in holding tanks and pipelines giving the the opprtunity to adjust prices up faster thus increasing revenue to offset the effects of monetary inflation.

and thereby conform to the parameters of your hypothesis.

Cullion
22nd July 10, 04:16 AM
At this point, should I put more work into showing that median income Americans are in some regards getting poorer?

Or should I now investigate which groups are getting richer ? Because that's an equally important part of the hypothesis to demonstrate before I go on to examine the mechanisms.

You guys decide.

Dr. Socially Liberal Fiscally Conservative Vermin
22nd July 10, 04:27 AM
I think both would be beneficial to your argument but I would be more interested in if median wage households are getting poorer.

BadUglyMagic
22nd July 10, 01:37 PM
At this point, should I put more work into showing that median income Americans are in some regards getting poorer in regards to economic self-sufficiency as demonstrated by the ability to purchase and accumulate income producing economic assets and maintain the same or similar lifestyle after retiring.

You guys decide.


I like the this one.

Cullion
22nd July 10, 01:47 PM
So far I've shown that median wage American households can't afford as much land, education, fuel or stock dividend as they used to.

What other kinds of goods should I look at? I'm expecting imported stuff like consumer electronics to have gotten cheaper relative to median incomes.

HappyOldGuy
22nd July 10, 09:47 PM
The data set I used when I made my assertion about land prices was 'Decennial Census of housing-based price index, aggregate land data, annual 1930-2000' on this page http://www.lincolninst.edu/subcenters/land-values/price-and-quantity.asp&b=4

The land price index in 1970 was 0.060559667 (1 being 2000). This means land prices increased by a factor of 16 over the period 1970-2000 according to that dataset.
I'm getting a bad link on that one.

The one you linked earlier from the same source was 0.17-0.18.

Edit: okay I found that one. I don't have an answer for the discrepancy tho. They are form the same guy, but all three sets use somewhat different methods to calculate the values.

Cullion
23rd July 10, 07:45 AM
The first two quarterly data sets are extrapolated backwards from a single census conducted in 2000 using indices from Case Shiller and the Federal Housing Finance Agency respectively.

The final, annual data set which is the one I quoted is based on decennial surveys with interpolation between each census.

HappyOldGuy
23rd July 10, 10:56 PM
The first two quarterly data sets are extrapolated backwards from a single census conducted in 2000 using indices from Case Shiller and the Federal Housing Finance Agency respectively.

The final, annual data set which is the one I quoted is based on decennial surveys with interpolation between each census.

I understand where they are coming from, but that doesn't explain why they have radically different numbers. And no, the one based on the decennial census is not inherently better for having more data points. All of them are only as good as their survey methods and models.

Cullion
24th July 10, 08:23 AM
Do Case Shiller and FHFA agree with each other ?

BadUglyMagic
24th July 10, 10:12 AM
What amazing timing.

Editor's note: Michael Snyder is editor of theeconomiccollapseblog.com (http://theeconomiccollapseblog.com/)
The 22 statistics detailed here (http://www.businessinsider.com/22-statistics-that-prove-the-middle-class-is-being-systematically-wiped-out-of-existence-in-america-2010-7#83-percent-of-all-us-stocks-are-in-the-hands-of-1-percent-of-the-people-1) prove beyond a shadow of a doubt that the middle class is being systematically wiped out of existence in America.
The rich are getting richer and the poor are getting poorer at a staggering rate. Once upon a time, the United States had the largest and most prosperous middle class in the history of the world, but now that is changing at a blinding pace.


He makes a number of assumption on his statistics, but then again he makes his money on the doom and gloom aspect.



http://finance.yahoo.com/tech-ticker/the-u.s.-middle-class-is-being-wiped-out-here%27s-the-stats-to-prove-it-520657.html?tickers=^DJI,^GSPC,SPY,MCD,WMT,XRT,DIA

Ajamil
24th July 10, 10:32 AM
Interesting, Bad, but not too much to do with Cullion's hypothesis. Should probably get it's own thread.

And to upset NoB, I recommend the American worker start a huge push to unionize the world's labor pool.

Cullion
24th July 10, 12:03 PM
Interesting, Bad, but not too much to do with Cullion's hypothesis. Should probably get it's own thread.

It's broader than my hypothesis, but not tangential. The video argues that people in the US are getting poorer whilst a tiny minority get wealthier, which I believe too. It's just I'm trying to be more specific about what types of goods they can purchase as much of as prior generations, and demonstrate a specific factor at work.

Cullion
24th July 10, 05:36 PM
Now, a couple of people said they want me to examine the 'Americans losing purchasing power in certain goods' part of the hypothesis. Please expand what you want examined or I'll move on to the 'and some people are benefiting' part of the hypothesis to keep some momentum in the research.

HappyOldGuy
25th July 10, 08:12 PM
Do Case Shiller and FHFA agree with each other ?

On this, yeah. But that could just be the common methodology.

Feryk
26th July 10, 04:38 PM
Now, a couple of people said they want me to examine the 'Americans losing purchasing power in certain goods' part of the hypothesis. Please expand what you want examined or I'll move on to the 'and some people are benefiting' part of the hypothesis to keep some momentum in the research.

I'd like to see how their purchasing power relative to automotives and technology stack up. Is that what you are looking for?

Cullion
26th July 10, 04:42 PM
I'd like to see how their purchasing power relative to automotives

Okay, I'll look for this one.


and technology stack up.

Define technology. If we're talking about the price of a kiloflop of processing power or a TV, I would've expected it to drop dramatically over the period 1970-present

Feryk
26th July 10, 04:50 PM
Okay, I'll look for this one.



Define technology. If we're talking about the price of a kiloflop of processing power or a TV, I would've expected it to drop dramatically over the period 1970-present


Yes. That is the problem. 1950's technology was probably televisions and radios whereas now it's wireless tech, tv's, computers, video game consoles, etc.

Is it possible to find a % of income based on technology spending?

Cullion
26th July 10, 05:03 PM
Consumer electronics gets cheaper all the time by almost any measure you could pick. Here are some sample nominal prices from the 1970s in the US:-

Atari Video Computer System $199 New York 1979

Dishwasher From $259.00 New Jersey 1976

JVC VHS Video Cassette Recorder $695 New York 1979

Micro Wave Oven From $169.00 New Jersey 1976

Television Zenith, 25" color $599 New Jersey 1976

This is what I expected.

BadUglyMagic
26th July 10, 05:11 PM
Not to be a killjoy but any asset commodity has to financial in nature or part of some base basket of commodity goods with the same equivalent goods available at the beginning of the timeline.

Apples and pineapples people.

Feryk
26th July 10, 05:30 PM
Consumer electronics gets cheaper all the time by almost any measure you could pick. Here are some sample nominal prices from the 1970s in the US:-

Atari Video Computer System $199 New York 1979

Dishwasher From $259.00 New Jersey 1976

JVC VHS Video Cassette Recorder $695 New York 1979

Micro Wave Oven From $169.00 New Jersey 1976

Television Zenith, 25" color $599 New Jersey 1976

This is what I expected.


Thanks for looking into it. What I was getting at is probably beyond the scope of what you are looking into. I'll deal with it another way.

Cullion
26th July 10, 05:34 PM
Not to be a killjoy but any asset commodity has to financial in nature or part of some base basket of commodity goods with the same equivalent goods available at the beginning of the timeline.

Apples and pineapples people.

Yes. Cathode ray tube colour televisions and stereos have been available for the whole period 1970-2000. They've dropped in price enormously relative to median income due to increased automation in production and offshoring even without having to factor in increasing quality of sound or image reproduction.

They also aren't a very useful good for decreasing one's reliance on govt. transfers or corporate employment.

BadUglyMagic
26th July 10, 06:23 PM
Yes. Cathode ray tube colour televisions and stereos have been available for the whole period 1970-2000. They've dropped in price enormously relative to median income due to increased automation in production and offshoring even without having to factor in increasing quality of sound or image reproduction.

They also aren't a very useful good for decreasing one's reliance on govt. transfers or corporate employment.


Of course, not to exclude foreign exchange triange from the home office, off-shored production facilitiesand end consumer market.

Has the overall timespan been changed to 1970?

Cullion
26th July 10, 06:30 PM
1970 is as far back as I could find a credible nominal median income source for when I last looked.

BadUglyMagic
26th July 10, 06:50 PM
Works for me.

Have you considered other wages than the IEEE? I do not believe they are representative as median. How did you arrive at the median wage for each of the included years? My apologies if it waas a recent post.

Cullion
27th July 10, 05:57 AM
I originally found median income for the entire US population dating back to that era, the IEEE came much later when I was examining HoG's point that he believed I was seeing the effect of illegal immigration and union busting.

The IEEE incomes were useful only to show that even highly skilled people who don't tend to be union members or get displaced by illegal migrant workers are being effected.

The effect is just as pronounced when you look at the median averages for the US population as a whole.

BadUglyMagic
27th July 10, 08:53 AM
Ok. Believable.

In my state there are the estimated range has a high end of around/over 800,000. The 2000 census counted 8 million as a state population.

While the illegal population fluctuates slightly, there is a major effect on the state. There are many places in the state where English is the secondary lanuage if spoken at all.

Cullion
2nd August 10, 03:34 PM
In this case I would expect wages for manual labour in your state to have done worse than the IEEE engineers I cited.

The IEEE engineers are there largely as a response to HOGs reasonable hypothesis that it's union busting and illegal immigration that suppresses the median wage, rather than some other mechanism. HOG's absolutely right when talking about the delivery drivers, un/semi-skilled construction labour etc.. But I think the IEEE data shows that something's happening even to highly educated middle class people who don't suffer from these forces.

BadUglyMagic
2nd August 10, 07:49 PM
In this case I would expect wages for manual labour in your state to have done worse than the IEEE engineers I cited.

The IEEE engineers are there largely as a response to HOGs reasonable hypothesis that it's union busting and illegal immigration that suppresses the median wage, rather than some other mechanism. HOG's absolutely right when talking about the delivery drivers, un/semi-skilled construction labour etc.. But I think the IEEE data shows that something's happening even to highly educated middle class people who don't suffer from these forces.

Depends. Yes and no. A key difference is that Georgia, powered mainly by the metro Atlanta area has seen relatively constant economic growth wit small (relative to national) recessionary adjustments.

edit: The caveat is that there has been wage inflation and also relatively continuous economic growth. The economy and demand for labor grew faster than the general demand could be satisfied. However, there are a bunch of howevers. The poultry processing industry is a big one. Georgia is a right to work state. An employee can be fired for being ugly. So hiring illegal aliens to work for 20% per hour less is a big deal to the owners.

HappyOldGuy
2nd August 10, 09:05 PM
And IIRC, relatively little home price inflation. At least compared to places like CA.

BadUglyMagic
2nd August 10, 11:07 PM
And IIRC, relatively little home price inflation. At least compared to places like CA.


For a few years (5 - 7) if you were doing badly, you could lazily make around 20 % a year. If you worked it and did renovations and used the right subs you could make 100% or more depending on location and what was done, what you buy price was, etc.

There were a number of demographic changes and not just illegals. The start was proably in the late 80s trending up through the mid 90s getting white hot in the early 00s tapering off and going bust a year of so after everyone else.

Cullion
4th August 10, 07:17 AM
Depends. Yes and no. A key difference is that Georgia, powered mainly by the metro Atlanta area has seen relatively constant economic growth wit small (relative to national) recessionary adjustments.

edit: The caveat is that there has been wage inflation and also relatively continuous economic growth. The economy and demand for labor grew faster than the general demand could be satisfied. However, there are a bunch of howevers. The poultry processing industry is a big one. Georgia is a right to work state. An employee can be fired for being ugly. So hiring illegal aliens to work for 20% per hour less is a big deal to the owners.

This is why I chose to look at stats for the whole US, otherwise we'd have way more research to do to try and account for this local stuff.

BadUglyMagic
4th August 10, 08:07 AM
This is why I chose to look at stats for the whole US, otherwise we'd have way more research to do to try and account for this local stuff.


Understandable.

BadUglyMagic
18th August 10, 10:56 PM
Bump.

EuropIan
25th August 10, 07:08 AM
also, tangential question:

Was the heavy implementation of credit used as a way to artificially keep "real wages" so low?

And how does credit and inflation fit together, if at all?

Cullion
25th August 10, 11:25 AM
Was the heavy implementation of credit used as a way to artificially keep "real wages" so low?

I see it like this (but haven't demonstrated it yet in this argument):

The system of debt and credit we have makes the median worker poorer, over the long term, because it expands the supply of money faster than the supply of real goods and services, therefore the people who get their hands on the money first (to speculate with) get to seize an ever larger slice of the total money supply without producing real goods in return.

Think of the worthless beads that some unscrupulous early American settlers handed out to Indians in return for land.

I think that's basically what Wall Street bankers are using artificially created credit to do to the rest of you now.



And how does credit and inflation fit together, if at all?

Short answer: Most of the money in circulation these days is credit. When I'm talking about inflation on sociocide, I'm usually talking about of the money supply, which leads to various prices going up. Mainstream economists using the word 'inflation', they're talking directly about price increases as measured in the average prices of a big group of different goods.

Long answer: Read wikipedia definitions of 'money supply' (click on links for explanations of the terms M0, M1, M2 etc..) and read the definitions wiki entries on RPI, CPI ad RPIX. Those acronyms are the different ways mainstream economists measure what they call inflation.

My argument here is that, from a certain long term perspective, if you're an American of median income, comparing your wage increases over the years to things like RPI and CPI is misleading and the real picture for at least the last couple of generation is more pessimistic.

Thank you all for being patient with me in this thread. I think I've made a decent case for 'the median American is, in certain key ways, getting poorer over time'.

Next I'm going to start demonstrating 'this is who has been getting richer'.

EuropIan
25th August 10, 11:57 AM
I see it like this (but haven't demonstrated it yet in this argument):

The system of debt and credit we have makes the median worker poorer, over the long term, because it expands the supply of money faster than the supply of real goods and services, therefore the people who get their hands on the money first (to speculate with) get to seize an ever larger slice of the total money supply without producing real goods in return.

Think of the worthless beads that some unscrupulous early American settlers handed out to Indians in return for land.

I think that's basically what Wall Street bankers are using artificially created credit to do to the rest of you now.



What about the average worker?

Also I am going to rephrase my question: do you think the increase in credit was used as a way to artificially increase purchasing power without increasing wages?

From your answer here, I would say it is "yes"



Short answer: Most of the money in circulation these days is credit. When I'm talking about inflation on sociocide, I'm usually talking about of the money supply, which leads to various prices going up. Mainstream economists using the word 'inflation', they're talking directly about price increases as measured in the average prices of a big group of different goods.

yes, I was aware of this ever since I realized that money is a construction and what fractional reserve banking was


Long answer: Read wikipedia definitions of 'money supply' (click on links for explanations of the terms M0, M1, M2 etc..) and read the definitions wiki entries on RPI, CPI ad RPIX. Those acronyms are the different ways mainstream economists measure what they call inflation.

My argument here is that, from a certain long term perspective, if you're an American of median income, comparing your wage increases over the years to things like RPI and CPI is misleading and the real picture for at least the last couple of generation is more pessimistic.

Thank you all for being patient with me in this thread. I think I've made a decent case for 'the median American is, in certain key ways, getting poorer over time'.


Thanks I'll get on that.


Next I'm going to start demonstrating 'this is who has been getting richer'.

The very rich?

Cullion
25th August 10, 12:10 PM
What about the average worker?

Also I am going to rephrase my question: do you think the increase in credit was used as a way to artificially increase purchasing power without increasing wages?

From your answer here, I would say it is "yes"

More than that. It's a way for some groups to generate enormous incomes without offering anything of useful in exchange (a system of credit where the credit could only come from real savings wouldn't work like this and would not in my view be fraudulent or harmful).

Your part of the answer explains why our elected representatives mostly looked the other way in the US and the UK.

EuropIan
25th August 10, 12:23 PM
yes, I was alluding to that, but I am not sure who the beneficiaries of such a scheme would be without imagining nefarious businessmen with monocles and top hats.

Cullion
25th August 10, 01:05 PM
Your mental image is a little bit 1920s. They're nefarious bankers with expensive cars and even more expensive women on the side.

We're talking about the power to create money out of nothing (within certain constraints). Asking who benefits from that is pretty much the same as asking who benefits from a counterfeiting operation.

Don't denigrate the term 'businessman' like that, we're talking about high level white collar criminals, not creative entrepreneurs or the guy who runs some long-established car hire business.

EuropIan
25th August 10, 01:07 PM
What about the disproportionate 'real wage' increase of CEOs?

Inconsequential?

Cullion
25th August 10, 01:10 PM
Absolutely consequential. I'm going to be getting into those numbers next.

BadUglyMagic
25th August 10, 05:16 PM
What about the disproportionate 'real wage' increase of CEOs?

Inconsequential?


CEOs of major corporations (those tending to get the disproportionate payments) tend to be paid on the expectation of stock share price increases.

There is actually enough information available to start a thread about it.

BadUglyMagic
25th August 10, 05:29 PM
also, tangential question:

Was the heavy implementation of credit used as a way to artificially keep "real wages" so low?

And how does credit and inflation fit together, if at all?




No.



All other things being equal, enough credit will allow enough potential buyers to become buyers. Depending on the good, price increases may occur. Real estate, tulips, real estate, etc.

It depends on the type and price of the credit. Different types of credit have different prices. Credit cards or home loans? Credit at 3-4% maybe cheap for for some markets. Credit of 12-29% may be cheap for others.

Cullion
25th August 10, 05:29 PM
I'm going to do it in this thread.

HappyOldGuy
25th August 10, 07:29 PM
CEOs of major corporations (those tending to get the disproportionate payments) tend to be paid on the expectation of stock share price increases.

There is actually enough information available to start a thread about it.

Feel free, cause your assertion isn't gonna stand up.

http://online.wsj.com/public/resources/documents/CEOperformance122509.pdf

Cullion
25th August 10, 07:32 PM
This is the next thing that might be troublesome for my hypothesis. If I can't show that the top-tier financial sector (including stock holders) is extracting more wealth than the top tier of other sectors, I'm going to have to revise my thoughts on what's causing the erosion of median income capital.

BadUglyMagic
26th August 10, 12:35 PM
Feel free, cause your assertion isn't gonna stand up.

http://online.wsj.com/public/resources/documents/CEOperformance122509.pdf


HoG,



Below are the title and first sentence of the article you linked to:




"Performance for pay? The relationship between CEO incentive compensation and future stock price performance



Abstract


We find evidence that industry and size adjusted CEO pay is negatively related to future shareholder wealth changes for periods up to five years after sorting on pay. "




Immediate/short term increases in share prices may be effected by actions such as layoffs, cutting costs, increasing overtime, and a few others. The problems with many short-term share price boosters is that generally they do not enhance long-term profitability, revenue and thereby negatively affect a company's ability to support continued growth or even prior annual share price increases.


Why might that happen? In order to meet the performance requirements of his/her contract the CEO will undertake actions as desribed above. The short-term result is that the share prices increase. The longer-term resultis that the company is unable to support the share price increase or current level because the short-term actions have eroded it's long-term profitable production capacity.



By doing these things and increasing the current share prices the CEO may(depending on his contract) receives a perfomance based bonus of possibly millions of dollars. Financial services companies are a little different, but mainly because they involve screwing the direct user. The best example would be credit cards over the last 10 years.


My statement in post #226 stands.

HappyOldGuy
26th August 10, 07:49 PM
I think you missed that the correlation was negative.

I.e. high ceo compensation was correlated with reduced shareholder value.

EuropIan
26th August 10, 11:28 PM
CEOs of major corporations (those tending to get the disproportionate payments) tend to be paid on the expectation of stock share price increases.

There is actually enough information available to start a thread about it.
wages have increased from roughly 50-60 times their average worker's salary in the 70's to over 300 times their worker's salary topping in the mid 90's.

I think you'll be hard pressed to find as dramatic an increase in stock share price.


Source tonight..

BadUglyMagic
27th August 10, 11:17 AM
wages have increased from roughly 50-60 times their average worker's salary in the 70's to over 300 times their worker's salary topping in the mid 90's.

I think you'll be hard pressed to find as dramatic an increase in stock share price.


Source tonight..

US figures hopefully.

Are individual corporate and industry capitalization values to be included?

EuropIan
27th August 10, 11:50 AM
US figures hopefully.

Are individual corporate and industry capitalization values to be included?
Yes, US figures.

Source EPI. (http://www.epi.org/economic_snapshots/entry/webfeatures_snapshots_20060621/)

http://www.epi.org/images/snap20060621.jpg


In addition, worker 'real' wages (http://www.workinglife.org/wiki/Wages+and+Benefits%3A+Real+Wages+%281964-2004%29)have gone down but 'real' executive pay has gone up.

BadUglyMagic
27th August 10, 11:51 AM
Executive Compensation: A Brief Review

http://www.temple.edu/cla/economics/research/documents/detu_10_02.pdf




For those interested:

Executive Compensation Analysis Reveals High CEO Pay for Underperforming Companies Results from Skewed Compensation Peer Groups and Board Indifference

http://eon.businesswire.com/portal/site/eon/permalink/?ndmViewId=news_view&newsId=20100624005334&newsLang=en



One of the key findings:

Companies with high pay also structured their larger CEO pay packages with a disproportionately richer mix of equity awards (69 percent of total pay) than either their self-selected peers (62 percent) or baseline companies (61 percent). Full value equity awards at companies with high pay constituted 41.3 percent of total pay, versus 35.2 percent among self-selected peers and at baseline companies.

EuropIan
27th August 10, 11:53 AM
Why are economists so obsessed with medians over averages?

BadUglyMagic
27th August 10, 11:56 AM
Yes, US figures.

Source EPI. (http://www.epi.org/economic_snapshots/entry/webfeatures_snapshots_20060621/)



In addition, worker 'real' wages (http://www.workinglife.org/wiki/Wages+and+Benefits%3A+Real+Wages+%281964-2004%29)have gone down but 'real' executive pay has gone up.


Where capitalization amounts available?

EuropIan
27th August 10, 12:05 PM
Where capitalization amounts available?
Are you trying to say since the two are so closely correlated it's obviously justified?

EuropIan
27th August 10, 12:09 PM
Would you rather shag an average chick or the median chick?
Depends on the sample size

EuropIan
27th August 10, 12:16 PM
THE WORLD! Ages 16-24
Holy shit! They're both bad. I'll take the range

BadUglyMagic
27th August 10, 12:16 PM
Are you trying to say since the two are so closely correlated it's obviously justified?



No. It is more of a relationship to their responsibility to the firm and its actual owners, the shareholders.

Comparing CEO or executive level pay to the growth (or lack of it) of a firm's market capitalization is a better indicator (as compared to industry type) of whether the CEOs/executives are truly earning their pay scale.

Cullion
27th August 10, 12:19 PM
Why are economists so obsessed with medians over averages?

A median average is often a better way of describing what 'most' people experience.

In this example, if we used mean averages rather than median averages, the pay would be skewed upwards because of the inclusion of the incomes of people whose stock portfolios pay millions a month in dividends. Using the median average here is a better approximation of what 'working joe' earns.

There is more than one reason why CEO pay has increased so fast beyond 'working joe' pay, and I have lots of reading to do before I can disentangle it.

EuropIan
27th August 10, 01:29 PM
No. It is more of a relationship to their responsibility to the firm and its actual owners, the shareholders.

Comparing CEO or executive level pay to the growth (or lack of it) of a firm's market capitalization is a better indicator (as compared to industry type) of whether the CEOs/executives are truly earning their pay scale.
and if the Δ"real wage" of the workers is negative when compared to the Δmarket capitalization?

Cullion
27th August 10, 01:49 PM
Stock market booms and busts come and go, but over a longer term, CEOs are doing proportionately better then their median employees in most industries, but the questions I'm researching are:

Why does the ratio of a CEOs pay to a median worker's pay keep increasing?

Is this effect more pronounced in some industries than others ?

Is it related in some way to the long term trend in low dividend yields ?

What other factors that aren't related to our system of credit should I account for?

BadUglyMagic
27th August 10, 03:28 PM
and if the Δ"real wage" of the workers is negative when compared to the Δmarket capitalization?


It may not mean anything.

BadUglyMagic
27th August 10, 03:42 PM
Stock market booms and busts come and go, but over a longer term, CEOs are doing proportionately better then their median employees in most industries, but the questions I'm researching are:


Is it related in some way to the long term trend in low dividend yields ?





iirc, this was discussed earlier in the thread.

Generally, there has been a change in the expectation of some investors as to how they will earn a return from owning stock. The change was from earning an income from the dividends to short term ownership and income from sale o the appreciated stock.

It is in the self interest of the CEO to aim for short term stock price increase. As discussed earlier, short-term actions taken by new CEOs to meet this market expectation (and the compensation/bonus components of their emplyment contracts).

Cullion
27th August 10, 03:45 PM
Increasing financialisation of the economy due to the way we create money and who gets it first is part of my hypothesis. I haven't demonstrated it yet. That's why I'm currently sifting through stats about who's been benefiting.

bob
28th August 10, 02:50 AM
Stock market booms and busts come and go, but over a longer term, CEOs are doing proportionately better then their median employees in most industries, but the questions I'm researching are:

Why does the ratio of a CEOs pay to a median worker's pay keep increasing?

Is this effect more pronounced in some industries than others ?

Is it related in some way to the long term trend in low dividend yields ?

What other factors that aren't related to our system of credit should I account for?

Check for correlation between no. of employees of a company and disproportion. If you want to give 10 000 employees a $5000 raise it's going to cost you $50 mil. Easier just to give the CEO another $5mil.

I'd be willing to bet the bigger the company, the more disproportionate the wage.