Gap between Rich and Poor growing?

[SEAL]

I think this has been the first serious post i have read from you in the way-too-long time i have been reading these forums.

...if you think you've seen it all....

[Eric is God]

Wealth is a delusion, you think a house really worth a life's saving?

One day the bubble is going to bust, guess who is going to laugh at last?

Geez, I am so cynical nowadays

For a lower to middle class family a house can easily be worth an entire family's life savings.

Here's something to make you more cynical. Australia's savings rate has negative in the last few years. Not that America's 0-1% is really amazing either. There are no hard rules for these things, but a national savings rate around 7-8% would be quite healthy.

[Emaho]

I read somewhere that todays youth gets about 110% more money from the parents then 10-15 years ago. We are getting to greedy.

[Jerome Scuggs]

Anyways, to back up my argument, an article posted today (nice timing)

Number of Global Millionaires Grows

[404 Not Found]

Currently in the States, it is estimated that the debt of the nation if divided amongst all it's citizens would be an avg. of $25,000.00 per person.

[Jerome Scuggs]

I think we need to make this distinction: the STATE is a seperate entity from the MARKET - so what are you talking about here, the poor/rich gap (a product of the MARKET) or the state's debt (obviously, a product of the STATE) ?

[404 Not Found]

I think we need to make this distinction: the STATE is a seperate entity from the MARKET - so what are you talking about here, the poor/rich gap (a product of the MARKET) or the state's debt (obviously, a product of the STATE) ?

My noting the States was incorrect, as it should have been "The National Debt of the United States of America"

[Jerome Scuggs]

My noting the States was incorrect, as it should have been "The National Debt of the United States of America"

That's what I mean, too - the State as an entity (or a fatty, if you really want to use a metaphor)

[DoTheFandango]

Hey, every time this happens there's some sort of revolution! Hopefully more like France's revolution than Lenin's revolution.

[Eric is God]

america owes the rest of the world several trillion dollers....You have a growing trade debt (importing more than u are exporting) and a growing government debt (all that spending on iraq and new nukes etc).

America's trading deficit is nothing to really worry about because it's been around forever and it doesn't make sense for Americans to manufacture most of the junk they get from China. Plus, it's not possible for America to fully supply itself with raw materials so it makes sense to import them from a country right next door (Canada). On the other hand, the ballooning budget deficit and to a lesser extent the balance of payments could have disasterous consequences 10-15 years from now.

Basically you guys are spending too much on credit, and now having to pay it back one way or another...

Are you talking about the government or individuals? I completely agree with the idea that individuals are spending way too much with little regard for the future. The balance of payments is also getting way out of control as well, but I realized it's not as bad as it seems. I don't see other countries knocking on America's door demanding repayment. Most likely, those kinds of debts to countries like China will be settled by cutting them in on rebuilding contracts and oil rights in Iraq.

Prices are going up because the doller is losing its value.

Only the prices of imports will go up, but since they make up most products in America that's pretty accurate.

When prices go up. Wages have to go up to keep up.

Correct, but that doesn't mean wages WILL go up. I believe inflation has been outpacing wage levels in America and possibly Canada the past few years.

This leads to inflation + higher interest rates (they have increased every month for the last year in america). Higher interest rates make people go bankrupt...

Interest rates are tied to inflation, but not in the manner you describe. A federal reserve will increase interest rates for two reasons. One: slow down a booming economy (and inflation) by making it more costly for businesses to borrow money for expansion. Two: increase demand for their currency on the international market by increasing bond rates and hopefully appreciating the American dollar. Guess which reason the American reserve is using.

If things continue and the debt keeps getting worse, america + the rest of the world could be heading for a global recession...

Well it's certainly possible. I think the media and some governments really over exagerate how bad recessions actually are. The common theoretical definition of a recession is two consequtive quarters of negative growth (usually real GDP is used as a measure). However, I often see the word recession used in the business section as two consequtive quarters of decreased growth (for example, 2.1% -> 1.9% -> 1.7%).

The other "fact" I keep hearing in the media is how Canada's economy is so dependant on America's. It makes sense, but in the last few years America's economy has been slowing down while Canada's has been growing. I just don't believe a recession (even a long one) in America's economy could trigger a global one as easily as I've heard. The Pacific Rim is having huge growth and a lot of it is not dependent on American.

[Eric is God]

if i was leader of usa i would just print more money!

Well it sure worked for Germany after the war. As long as you don't mind hauling wheel barrows of money ot buy bread it's great.

[K2Grey]

Well it sure worked for Germany after the war. As long as you don't mind hauling wheel barrows of money ot buy bread it's great.

I thought that was before the war. Either way, leads to the classic photo of the German housewife lighting her breakfast fire with millions of [German currency] in notes.

[Eric is God]

I thought that was before the war. Either way, leads to the classic photo of the German housewife lighting her breakfast fire with millions of [German currency] in notes.

I meant after WWI I still remember a pitcure similar to the one you described in my grade 12 economics textbook.

[Liquid Blue]

Posted this topic on another forum and got an interesting response, here's a look at how things are going in Dubai-

Falcon, not really. The government may increase the burden but they are not the cause. Let's take a look at the Arab Gulf. As you recall, I was in Dubai and Doha in March. Two years ago or so, a new natural gas reserve was discovered in Qatar. Then the modern, open-minded crown-prince took over from his conservative, old fashioned father. The nation opened its doors and liberalised.

Money is pouring in like you cannot believe. The entire city is under construction (literally). I mean every fucking road is being expanded, the city centre and the coast has dozens and dozens of construction projects going on. When I say projects, I mean high-rises, sky scrapers, towers, hotels, gargantuan museums and educational institutes. When my uncle moved there 3 and a half years ago, there were only 2 houses in his area. His and another about a quarter to half a mile away. Now there are something like 20 or even more. His area is so new and popped up so fast that it doesn't even have a name yet. The amount of new neighbourhoods and residential areas is staggering. Oh and how could I forget, the Asian Games are going to take place in Doha in December.

Let me explain to you exactly what working people (non-management) told me. And when I say working, I don't mean contruction workers or labourers, I mean specialists (engineers, etc.) and white-collar folks in multi-nationals. When they first went to Qatar, pay was good, prices were low. Now, they are running into debt just to be able to pay their rent. People who didn't sign rent contracts of 5+ years got pretty dicked. Why? Because there was no rent control, no regulations. When their contracts expired, rates shot up by about 200% to 500%. Yes, by that much. The government had to step in this year and set a 10% roof because of fears of what will happen next year. People get attracted to the gulf because of zero income tax, better pay and cheaper living costs, now many are stuck because of debt. The married folk are crazy fucked, especially those who are paying for cars. Now costs of living are not that bad, and some things are dirt cheap (oil, duh) there, but expenses for shelter has ripped people a new asshole.

Most landlords never even gave the option of long-term contracts because they were expecting this (they are smart fucks). My uncle was lucky that the home he got was for a friend of his. They struck a deal (good rent price) and signed something like an 8 year contract. He's also a general manager of a construction/interior finishing company, so needless to say he is doing pretty well. But those others who were not lucky enough to have the contacts he has or were not able to get long-term rent contracts have been massively screwed. Wages are not increasing, but company sales and profits are swelling like fucking crazy. I spent 5 days in the Hilti office, they had 135% growth last year and are projecting 67% this year. That's fucking tripling in size in 2 years. Wages did not increase, but you can be damn sure inflation did and prices have begun to rise on food and other general expenses, but those are still bareable. Cost of shelter has become insane.

I am not saying that you should expect to pay the same rent, but things can get seriously fucked if they go unregulated. And I wasn't talking about control a la NYC, but something minimum. Again, you will not believe the pains people in Doha have begun to go through. The 10% roof is only temporary until inflation is somewhat stemmed or cools down. Imagine you pay 1000 US Dollars per month this year then come January, the landlord tells you the new rate is 3500 US Dollars now or gtfo. It got fucking ridiculous. Imagine leaving your country for the Arabian desert to be able to make some doh and save up, but then you end up in debt instead.

[Epinephrine]

Limited sleep and limited time. I will make this point form, and use the USA as the example:

1) Yes the gap is growing. In fact, looking at the wealth controlled by the top 1% in America, we are reaching levels not seen since the early 1900s, the age of the robber barons. The stats are similar for the top 0.1%. (see latest issue of The Economist) Similar trends are happening for the top 10% and the top 25%, while the bottom 25% is seeing their wealth shrink to levels not since a century ago.

2) Mobility between classes is decreasing as well to hit an all time low since the age of the robber barons. Defining the classes as bottom 25%, next bottom 25%, top middle 25% and top 25%, someone born into any one of these actually moving into another class is at it's lowest time ever. This is due to a number of factors, such as upbringing, genetics, and political opportunity. The simplest way to sum it up is, when kids of doctors and engineers have money to attend after school classes and piano lessons starting at age 3 and have discipline parents who instill hardworking values into their kids, smart kids from poor families no matter how smart are going to have a very hard time catching up because of lost opportunity. (From The Economist a few months back, I can't recall the issue)

3) Wages are flat, inflation continues. Savings rate is almost at 0% as Eric has told you. Pretty soon it's going to go into the negatives. What this means is that people will be in debt forever without any chance of ever repaying it. That cannot possibly work in the long term.

Meanwhile people who don't depend on wages (the upper class, i.e. stockholders who have seen record corporate profits in recent years and steady stock growth in the long-term) don't have this problem and their wealth grows as GDP grows and keeps in balance or even over balance with inflation.

4) Taxes for the upper classes keep getting cut under the current administration, while taxes for the poor are stagnant, or if they are cut, they matter a lot less because these people make a lot less. Meanwhile services which are also cut because of lower taxes disproportionally affect the poor. Thus services which may have helped the poor get out of being poor are gone (i.e. education, job training programs, healthcare). This is not to say a truly brilliant person cannot move up in the world, but the fact is when the rich can afford good education, job training and healthcare and the poor cannot, they need these services in order to have a better chance overall to catch up if they ever will.

5) Illegal immigration is artificially depressing wages. So is wage competition from globalization. So is the fact that most jobs that less educated, less skilled or less intelligent people can do are being taken overseas or given to willing illegals at an ever lower wage (relative to real prices). Yet again this mostly affects those people who cannot get better jobs for whatever reason. Whatever you believe about these people, it is a sizable population, and thus the gap ever increases.

6) Housing prices have been one of the prime drivers of growth in the past 5 years. The fact is the housing boom is keeping the economy alive and allowing people to spend WAY beyond their means (by way of second mortgage and so on). But it's also a fact that because housing prices are so high in 1/2 the country (the coasts, not the middle section of America where land remains plentiful), and because baby boomers are living longer than ever, the next generation... OUR generation (us on this forum) is going to have a MUCH harder time to find an affordable place to live in the future. With housing prices at an all time high, wages flat, population steadly increasing, and the baby boom generation sticking around another 20 years, we will HAVE to as a group settle for less. Smaller houses because of housing prices and flat wages, and also less things because of inflation, flat wages and no ability to mortgage off anything because we don't own anything to mortgage. Thus our standard of living is going to be lower.

This actually creates an interesting divide. On one hand, you have the boomers who did prepare for retirement who are now hitting the highest wages they've ever hit, and also seeing their investments come to maturity. On the other hand you have the younger generation who is entering a market of flat wages and increasing prices and no assets, and that's your two classes right there, steadly going away from eachother. Add in the fact that the parents aren't going to die for anohter 20 years, and you will see the younger generation won't even get an inheritance either for a long time. As well, seniors who didn't prepare as well for the future are now hit by record healthcare costs and housing costs, and thus the second they stop working they become very poor. And thus, the gap increases.



Okay that turned out not to be point form at all...