Cartoon of the day

Special mention

 

Anyone say Veblen?

 

Gifts for the 1 percent in a still-predatory economy. . .

Apple laptop—literally

[ht: ke]

Public art of the day

Barbara Kruger, “Belief+Doubt”

Cartoon of the day

Special mention

Politics, economics, and business cycles

source*

In the midst of the Second Great Depression, mainstream economists continue to heap scorn on one another concerning the relative merits of their “screw-the-unemployed” monetary-policy-has-no-effect and “hydraulic Keynesian” IS-LM-in-the-liquidity-trap models.

And they continue to ignore the “political-business-cycle” model of Michal Kalecki, which I wrote about a year ago, and which has been rediscovered by Steve Waldman.

Here is Kalecki describing with preternatural precision the so-called “Great Moderation”, and its limits:

The rate of interest or income tax [might be] reduced in a slump but not increased in the subsequent boom. In this case the boom will last longer, but it must end in a new slump: one reduction in the rate of interest or income tax does not, of course, eliminate the forces which cause cyclical fluctuations in a capitalist economy. In the new slump it will be necessary to reduce the rate of interest or income tax again and so on. Thus in the not too remote future, the rate of interest would have to be negative and income tax would have to be replaced by an income subsidy. The same would arise if it were attempted to maintain full employment by stimulating private investment: the rate of interest and income tax would have to be reduced continuously.

Dude wrote that in 1943.

What we’re watching right now is a race to the bottom, with both interest rates and income taxes, in an attempt to boost private consumption and investment. The result is that corporate profitability and income inequality continue to rise and, yet, full employment remains as elusive as ever.

*The graph shows the real (deflated) Federal Funds Rate, which is the interest rate at which banks trade with each other (usually overnight, on an uncollateralized basis) the balances they hold at the Federal Reserve. This is the rate Casey Mulligan got wrong in his initial post, and later had to correct.

Conspicuous experiences

Apparently, the latest trend in the growing global luxury market is (to update Thorstein Veblen) “conspicuous experience.”

According to the Boston Consulting Group’s latest study, “Luxe Redux: Raising the Bar for Selling of Luxuries,”

The shift from owning a luxury to experiencing a luxury is accelerating — and many providers of high-end goods such as watches and handbags may soon miss out on a huge growth opportunity if they don’t get smart about their customers’ new inclinations.  . .

“More and more luxury shoppers tell us they love experiences that make them feel pampered,” says Jean-Marc Bellaiche, a BCG senior partner and New York-based global leader of the luxury, fashion, and beauty topic area. “But if luxury-goods players are to capitalize on the ‘experience’ trend, they have to move quickly and forcefully. To date, very few have been successful in adding experiential elements to their offerings, websites, or in-store execution. While the lack of such elements may not yet be hurting the providers’ financials, it is a missed opportunity to boost performance.”

Here are some examples of the new conspicuous experiences on offer:

• LVMH, one of the world’s largest luxury companies, is developing its Cheval Blanc hotel franchise; there is already one Cheval Blanc hotel in Courchevel, a French ski resort, and another in the Maldives, and LVMH plans to open locations in Oman and Egypt in 2012.

• BMW, the German automaker, was one of the first high-end carmakers to turn the experience of waiting for delivery of a new car from frustrating ordeal into fun-filled activity: buyers of BMW’s Mini Cooper cars receive new-owner updates about the assembly of their car and its journey from the factory.

• IWC, the Swiss watchmaker, which has a watch museum at its headquarters, promotes its Pilot’s watches in its flagship store in Hong Kong by offering customers a “ride” in a flight simulator with an extra-large screen and surround sound.

This is what the world looks like for those on top in the midst of the Second Great Depression.

Chart of the day

Derek Thompson reproduces this chart (but the original source for Nicholas Felton’s work is here) and adds the following commentary:

There is a strain of conservatism that suggests that the march of technology has made life so good for people at the bottom that we don’t have to worry much about income inequality. Tens of millions of Americans are living in poverty, “but it’s okay, because they have more microwaves than ever before,” is an argument that exists, and is widely persuasive. It’s accurate to say today’s poor own stuff that yesterday’s poor wouldn’t recognize. But the ubiquity of microwaves doesn’t displace the moral obligation of the richest country in the history of the world to protect people who literally can’t afford food to put in that microwave. Medical bankruptcy is hardly alleviated by the falling price of flat screen televisions.

I certainly wouldn’t put it as a moral obligation of the rich to the poor but the larger point stands: the availability of more stuff (including new consumer technologies) does not overcome the problems created by grotesque inequalities in the distribution of income and wealth.

Here’s the other part of Felton’s original chart:

Occupy housing

Jason Reblando’s project of photographing the Greenbelt Communities that were created during the New Deal is an important reminder: of the possibility of creating housing for people during difficult economic times, of organizing housing on a cooperative basis, and of solving the environmental problems associated with individual consumption by fostering collaborative consumption.

They are a reminder, in other words, of what has been accomplished in the past and what could be done today to occupy housing.

Public art of the day

source