Home > Plutonomy, Political Economy, real-world economics review > Plutonomy Bubble Number Three

Plutonomy Bubble Number Three

March 24, 2012 Leave a comment Go to comments

from Edward Fullbrook

Graph of S&P 500 Index

“The Political Economy of Bubbles”
http://www.paecon.net/PAEReview/issue59/Fullbrook59.pdf

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Categories: Plutonomy, Political Economy, real-world economics review
  1. Helge Nome
    March 24, 2012 at 4:29 pm | #1
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    Look upon the curve as a saw blade that is ripping society apart.

  2. Ed Hamilton
    March 24, 2012 at 4:51 pm | #2
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    The intellectually honest way to show price history is inflation-adjusted.
    http://homepage.mac.com/ttsmyf/poster1.html

  3. Alice
    March 24, 2012 at 11:07 pm | #3
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    Excellent article and a very ugly graph which confirms the fact that whatever has been going on in terms of bad policy commenced sometime from the mid seventies. It seems the old allies from WW2 are now allied (add Australia as well) in destroying their own economies. What surprises me is that the top twenty percent are not more aggrieved at the top 1% – the top twenty percent have also had to carry more of the tax share avoided by the top 1%. J K Galbraith was probably one of the foremost economists to document the beginnings of the failurse of policy in the US from that time, writing in 1994 (The World Economies since the War)
    “the striking achievement of the Reagan policies, however, was the improvement in the fortunes of the affluent and the rich whilst visiting neglect upon the poor. Here the results are without question. No one will ever have any reasonable doubt that Mr Reagan did keep faith with his constituency.
    Yet on the 1980s era where the seeds of this mess the US now finds itself in were heavily fertilised, Galbraith goes on…”Tax reduction oriented to the affluent, unduly enhanced defense expenditure and a large deficit in the federal budget were the prime manifestations of error. Related was a large and persistent deficit in the American balance of payments account, causing America to shift from being the world’s largest creditor to being, by a wide margin, its largest debtor. There was erosion of the nation’s competitive economic position, social tension in the big cities, financial speculation and manipulation extending to widespread and unsubtle larceny and, in the end, the painful recession cum depression of the early 1990s”.

    That was the first of those three saw movements in the graph above and should have served as a warning that something needed to change.
    Yet when the priests of financial instutions are paid to be economic advisers to governments for and on behalf of the wealthy using quasi religious policy models, then more of the madness of the graph above is all we can expect (and further declines in US competitiveness). The “unsubtle larceny” has extended into the corridors of government power.

  4. Stuart Birks
    March 25, 2012 at 1:50 am | #4
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    Just one query, over time do the same people make up the top one per cent?

    • Garrett Connelly
      March 25, 2012 at 9:26 pm | #5
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      Yep, mostly, from what I’ve seen, though it’s obscured slightly by the population explosion.

  5. Helge Nome
    March 27, 2012 at 4:21 am | #6
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    The graph above indicates financial engineering.
    There is no crisis. There never was. If you control the credit spigot,
    you can do whatever you like.
    We are being played for suckers.

    • Alice
      March 27, 2012 at 10:55 am | #7
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      We are. Thats what happens when corporations and powerful finmancial institutions control the voting process, control the elected representatives, manipulate the legislative process,spend billions on lobbying, place their mothpieces in the media, exempt themselves from sanctions against any crimes, exempt themselves from even having to face the law…….its Gotham City we all live in now but there is no Batman and the democrats are no better than the republicans. The pretense of an organised system that embeds the safeguards of the law is now a joke in the US and elsewhere.

    • Ed Hamilton
      March 27, 2012 at 4:11 pm | #8
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      Look at the first two charts here
      http://homepage.mac.com/ttsmyf/RD_RJShomes_PSav.html

      Also look at
      http://homepage.mac.com/ttsmyf/debtGDP_whys.gif
      and note that lately is well above half that for WW2.

      We are super-suckers.

  6. Michael Monterey
    March 28, 2012 at 12:00 am | #9
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    I forgot where I saw it and who said it, but it seems appropriate: “Error is natural and relatively unavoidable. An error on becomes a mistake if we repeat it.” We are only suckers and victims if we keep “buying” and putting up with the same mistakes repeatedly. As long as we are not part of the solution we are The Problem. Repeatedly identifying the mechanics and effects of the problem and complaining about it is not the solution. There were plenty of facts and statistics and great RWER articles and even some great graphs & charts back in 2007 & 2008. “The Creature From Jekyll Island” has been around for a long time. Various real economists have been explaining the nature and aims of plutocracy for decades. When will it be OK to start discussing the solution? After it becomes thinkable? Hmmm…..

  7. Corey
    April 4, 2012 at 10:41 pm | #10
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    I find your argument on the plutonomy a little weak regarding income distributions being very different in other developed economies vs the US. Your chart depicts income including cap gains for the US and not for the other developed nations. Given that cap gains are a function of stock market performance, it only takes a glance at the above chart to realize where most of the income inequality is being generated. Not saying there isnt a huge discrepency, only that the measurment seems a little biased. Also dont forget cap gains for US investors would be based on returns for the US market, whose performance will vary from other markets in the developed world.

    • Edward Fullbrook
      April 5, 2012 at 9:28 am | #11
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      JW

      Please go back and have a closer look at my paper. Your supposition that capital gains may account for the differences regarding income distributions between the US and other developed economics, although plausible, turns out, as my paper shows, not to be the case. Indeed, it is one of the possibilities that I investigated when researching for my paper. It turns out that the rate of increase of income share for the top one percent in the US is slightly greater when capital gains are EXCLUDED than when they are included. This is shown near the beginning of my paper in Exhibits One and Two. The first shows average incomes including capital gains in the US, whereas Exhibit Two shows income EXCLUDING capital gains in the US. Have a look. http://www.paecon.net/PAEReview/issue59/Fullbrook59.pdf

      Edward

  8. Michael Monterey
    April 6, 2012 at 6:34 pm | #12
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    What I find most curious about the whole business of “modern economics” (conventional plutonomics), despite the Post-Autistic Economics “movement” of the recent past, is that it seems incapable of freeing itself from the spell of ethical/moral autism. Should we simply call it the aftermath of Randian Positivism, moral relativism (i.e., ethical dualism, i.e., the sociopathic residue 5 millennia of enculturated corruption), or just spiritual morbidity? Now, please don’t get me wrong, I respect commitment to excellence and truth. What I keep failing to understand is how any “economist” with a bit of heart left can go on whipping the dead horse pucky of plutonomy, then go home and sleep at night. Back in the pre-Meltdown Day, it used to be that PAE & RWER were full of life, spirit, righteous if reserved indignation and intense if well tempered outrage, and ordinary mortals could take hope for the fate of the world (if not plutonomics & sociopathic plutocrats). Now, it seems that either paychecks or PTSD has worn down the movement to a crawl, maybe not a snail’s pace, but where is the result — The Solution, the ARE (actual reality economics) alternative to Plutonomy? And, if it has emerged from beyond the Ivory Towers and fortress walls of plutonomics, sneaking up on the profession “like a thief in the night” — so what? Do plutonomists not breathe, bleed, eat, drink, shit & pee like us amateurs (i.e., Fr.: one who does what “he” does for the love of it) — are plutonomists so deranged from lack of good nights’ sleep that they are over the hill batcrap looney? Or are they actually shape-shifting reptilians from outer-space, come to turn Planet Stupid into Planet Lizard? I give up. Can anyone tell me what happened and why the RWER blog seems mainly devoted to putting off The Solution, i.e., not accomplishing its original mission? Or, if integrating the quanitative, qualitative, and ethical dimensions of economics and saving humanity from more sociopathic-ecocidal plutonomy is not the prime mission objective of RWE, then what is? Any help or RW dialog will be deeply appreciated. Yours Truly, Watching, Waiting & Wondering

    • Stuart Birks
      April 7, 2012 at 9:00 am | #13
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      Before you can propose a solution, you need to understand the problem. One suggestion by Stiglitz is at: http://www.aljazeera.com/indepth/opinion/2011/10/2011104111133888567.html

      • Michael Monterey
        April 9, 2012 at 12:00 am | #14
        Quote

        Ah… Thank you for demonstrating my point & confirming my insight. For a truly thorough review of the cause of inequality and plutocracy/plutonomy and mediocracy, see “Awareness & Value” a new theory of fundamental economics and natural values” at The Greenbook blogsite: If you notice any errors at the level of meta-logic or whatever, I will appreciate seeing your detailed point-by-point critique, but I won’t hold my breath (while waiting). The RWER alley of the blogosphere is clearly dead or terminally gangrenous & getting stinkier everyday. Ah, well… could’ve been such a wonderful forum for working out the alternative to plutonomy’s bloated corpse exploding/imploding & spewing a mega-tsunami of putrid pus all over the Ivory Tower. How sad that they don’t teach Guts 101, or Ethics & Karma, or Spiritual Integrity, or Actual Reality Economics, or Holontology in college.

      • Stuart Birks
        April 10, 2012 at 1:02 am | #15
        Quote

        And one approach that some here may like is described at: http://www.telegraph.co.uk/news/politics/georgeosborne/9194558/Osborne-Im-going-after-the-wealthy-tax-dodgers.html
        Quoting: :The analysis convinced Mr Osborne that millionaires must pay a minimum rate of tax equivalent to about a third of their earnings, which has been described as a “tycoon tax”.”

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