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Special mention

Steve Bell 22.10.2014



The second part of That Film about Money is even better than the first.

That’s because it explores the connection between money and the crisis of 2007-08, including giving the working-class more debt instead of increasing wages (which is why, as you can see below, household debt service payments as a percent of disposable personal income rose so precipitously from the early-1990s onward, until the crash) and why the banks have recovered since the crash (by taking cheap money from the government and lending it back, to finance the deficit, at higher rates of interest).



Special mention

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New Jersey Governor Chris Christie announced yesterday, at the U.S. Chamber of Commerce’s annual Legal Reform Summit in Washington, D.C., he’s sick and tired of hearing about the minimum wage.

“I have to tell you the truth,” said Christie, a potential 2016 presidential candidate. “I’m tired of hearing about the minimum wage. I really am. I don’t think there’s a mother or father sitting around a kitchen table tonight saying ‘you know honey, if our son or daughter could just make a higher minimum wage, my god – all our dreams would be realized.”

Christie continued, “Is that what parents aspire to for our children? They aspire to a greater growing America where their children have the ability to make much more money and have much greater success than they had. And that’s not about a higher minimum wage, everybody. So we should start talking about what our aspirations are and how they can be achieved rather than the president playing to the lowest common denominator on a higher minimum wage.”

The fact is, as Max Ehrenfreund explains, about half of all workers earning a minimum wage in this country are not children. They’re at least 25 years of age.


While median household incomes in the United States have fallen since the economic recovery began (down almost 6 percent since 2009), incomes at the top (as documented in the chart above) have soared.

The question is, how much of that inequality can be blamed on monetary policy—in particular, on quantitative easing?

As I see it, Richard Barwell, Senior European Economist at the Royal Bank of Scotland and former Senior Economist of the Bank of England, offers the correct answer:

“Given an unequal distribution of income and wealth it is always likely to be the case that a policy which generates a robust and sustained recovery will benefit those at the top more than those at the bottom.”

Of course. Concentrate incomes and wealth in the hands of a tiny minority at the top and a recovery that restores corporate profits and equity share prices will per force lead to more inequality in the distribution of income and wealth.

The issue Barwell and others simply don’t want to address, however, is: has the resumption of the pre-crisis inequality trend, which is a condition and consequence of quantitative easing during the past five years, itself undermined the possibility of a “robust and sustained recovery” going forward?

wealth ratio

Credit Suisse [pdf] appears to celebrate the growth of wealth, in the United States and around the world, during the last few years.

But the investment giant also sounds an alarm concerning the growth in the ratio of wealth to income:

For more than a century, the wealth income ratio has typically fallen in a narrow interval between 4 and 5. However, the ratio briefly rose above 6 in 1999 during the bubble and broke that barrier again during 2005–2007. It dropped sharply into the “normal band” following the financial crisis, but the decline has since been reversed, and the ratio is now at a recent record high level of 6.5, matched previously only during the great Depression. This is a worrying signal given that abnormally high wealth income ratios have always signaled recession in the past.