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I never laid blame, I simply said it was a factor, and a factor you wouldn't recognize, because you don't read financial reports published by industries.
"Rampant commodity speculation" did not cause people to lose their jobs.
People lost their jobs, because certain sectors of the economy were unable to compete globally with new entrants in the global market like China, Vietnam et al.
Defaulting on a mortgage does not cause one to automatically lose their job, but losing their job may cause one to default on their mortgage and in a household with two wage-earners dependent on making mortgage payments, the loss of a job by one or both wage-earners negatively impacts their ability to make mortgage payments.
If you did not have rampant job losses, then the mortgage crisis never happens and you would be none the wiser.
Exactly .... no one woke up one morning and said today I can’t pay my mortgage.... they were paying and were fine ..
The credit markets froze when investors panicked over news that some banks made loans they should not have .... the tiered derivatives that were being created out of the mortgage bundles suddenly stopped moving as investors stopped buying them ...
Without mortgages being sold banks couldn’t make new loans .. money is the blood of businesses and so is credit ....when things froze companies could not make payroll or function ..so layoffs happened ....the credit default swap market went in to a tail spin effecting all loans ... so people lost jobs ....then they couldn’t pay the mortgage...
I never laid blame, I simply said it was a factor, and a factor you wouldn't recognize, because you don't read financial reports published by industries.
"Rampant commodity speculation" did not cause people to lose their jobs.
People lost their jobs, because certain sectors of the economy were unable to compete globally with new entrants in the global market like China, Vietnam et al.
Defaulting on a mortgage does not cause one to automatically lose their job, but losing their job may cause one to default on their mortgage and in a household with two wage-earners dependent on making mortgage payments, the loss of a job by one or both wage-earners negatively impacts their ability to make mortgage payments.
If you did not have rampant job losses, then the mortgage crisis never happens and you would be none the wiser.
Mircea, rampant commodity speculation" did cause people to lose their jobs.
Federal Reserve Board chairman Alan Greenspan described it as "unjustifiable exuberance". President Bush's "credit crunch" caused a financial panic in the USA and globally.
Defaulting on a mortgage does not cause one to automatically lose their job. But widespread mortgage defaults due to banks knowingly making sub-prime rate "liar loans", and then bundling them for resale, speculators leveraging exotic unregulated derivative securities, certainly caused financial panic in the USA and worldwide, which caused great many job losses.
Refer to:
https://www.theguardian.com/business...nch.useconomy2
Oct 03, 2008*· Bush signs $700bn economic bail-out plan approved by Congress. Such is the freeze on funding that the governor of California, Arnold Schwarzenegger, said his state may need a loan of up to $7bn from the federal government to plug a short-term financial gap caused by the credit crunch.
Author: Andrew Clark
https://www.youtube.com/watch?v=XH7CvOeqS3g
Jul 21, 2015*· HEADLINE: Bush prods Congress on student loan bill ----- CAPTION: President Bush said Saturday that the credit crunch is threatening the availability of …
https://en.wikipedia.org/wiki/United...housing_bubble
The United States housing bubble was a real estate bubble affecting over half of the U.S. states. Housing prices peaked in early 2006, started to decline in 2006 and 2007, and reached new lows in 2012.[2] On December 30, 2008, the Case–Shiller home price index reported its largest price drop in its history.[3] The credit crisis resulting from the bursting of the housing bubble is an important cause of the 2007–2009 recession in the United States.[4][5]
Increased foreclosure rates in 2006–2007 among U.S. homeowners led to a crisis in August 2008 for the subprime, Alt-A, collateralized debt obligation (CDO), mortgage, credit, hedge fund, and foreign bank markets.[6] In October 2007, the U.S. Secretary of the Treasury called the bursting housing bubble "the most significant risk to our economy"
Where are you getting the notion that, "true" inflation is ~0 or maybe even negative?
All of the inflation estimators such as the CPI, the GDP deflator, the chain-weighted CPI, or even the trendy personal-consumption expenditures index typically shows an inflation number within 0.3 percentage point of the others.
Most all economists agree all of the above estimators overstate true inflation because of what Alan Greenspan, for example, calls "A bias in the statistic." What is the nature of this bias? By the time the Bureau of Labor Statistics puts something new in the CPI basket, it’s already cheap, so it misses the massive human-replacement price decline. For example, cellular telephones declined in price by over 95% before they were added to the CPI basket. Ditto for smart phones. Ditto for flat screen TVs. Ditto for, well, just about everything: the CPI estimators never include the massive price declines that occur after new products & technologies hit the market, so they over state the true underlying inflation.
Alan Greenspan said on 60 minutes a couple months ago:
Quote:
So there is a bias in the statistic. You’re getting statistics which are not correct... If you had a 2% inflation rate as currently measured in the CPI, it’s the equivalent of zero percent for actually what consumers are buying.
With the increase to a $15 minimum I haven't noticed any deflationary effects. All I've seen is price increases in restaurants, the laundromat, and other low profit margin businesses.
True - but just to be clear, price increases in restaurants, the laundromat, and other low profit margin businesses in response to a $15 minimum wage is not inflation. Inflation is an increase in the general price level, not merely an increase in certain market segments sensitive to the minimum wage.
I never laid blame, I simply said it was a factor, and a factor you wouldn't recognize, because you don't read financial reports published by industries.
"Rampant commodity speculation" did not cause people to lose their jobs.
People lost their jobs, because certain sectors of the economy were unable to compete globally with new entrants in the global market like China, Vietnam et al.
Defaulting on a mortgage does not cause one to automatically lose their job, but losing their job may cause one to default on their mortgage and in a household with two wage-earners dependent on making mortgage payments, the loss of a job by one or both wage-earners negatively impacts their ability to make mortgage payments.
If you did not have rampant job losses, then the mortgage crisis never happens and you would be none the wiser.
Perhaps if you were better informed you would not be making ridiculous statements like that. I assume you are young and were not an adult in 2008, when crude oil hit $107/bbl. By 2006, speculators were buying tankers of oil just to store them, speculating on higher prices later. By 2007, every available storage facility in the United States was full, and speculators were renting offshore storage for their wealth of oil.
Meanwhile, businesses saw their transportation costs escalate far in excess of any minuscule wage increases for unskilled workers. Consumers saw their heating oil and gasoline bills increase by 80%. Rampant commodity speculation sucked the blood out of the US economy. People lost their jobs because business expenses went through the roof.
Economic theorists have a myopic focus on textbooks and ignore reality, which is why they have no predictive ability. Anyone who was paying attention to current events could see that a severe recession was imminent.
Your youth also may have caused you to misunderstand the housing crisis, which was also based on speculation. There was a common fantasy that real estate prices would always go up. Perhaps the most benign form of speculation was people buying more house than they needed. Other people used equity mining to support a lifestyle they couldn't afford. Beyond that were forms of extreme wild speculation, which included balloon payment mortgages, zero principal balloon payment mortgages and other similar fiscal insanity. Why not? Somebody would buy the paper.
In some countries, bank officers were actually sent to prison. The oil speculators were punished by the crime, as they found themselves stuck with over a year's production and a sharply curtailed market
To suggest that a small increase in the minimum wage had a significant economic effect is insanity. There was a federally subsidized unemployment insurance that provided benefits for a year and a half.
All of the inflation estimators such as the CPI, the GDP deflator, the chain-weighted CPI, or even the trendy personal-consumption expenditures index typically shows an inflation number within 0.3 percentage point of the others.
Most all economists agree all of the above estimators overstate true inflation because of what Alan Greenspan, for example, calls "A bias in the statistic." What is the nature of this bias? By the time the Bureau of Labor Statistics puts something new in the CPI basket, it’s already cheap, so it misses the massive human-replacement price decline. For example, cellular telephones declined in price by over 95% before they were added to the CPI basket. Ditto for smart phones. Ditto for flat screen TVs. Ditto for, well, just about everything: the CPI estimators never include the massive price declines that occur after new products & technologies hit the market, so they over state the true underlying inflation.
Alan Greenspan said on 60 minutes a couple months ago:
Short on time so I'll circle back later.
In reverse order of importance.
1. Alan G. has been so wrong so often regarding inflation that his words mean little to me. Several years ago he predicted US inflation between 3-10% that would last for years. Didn't happen. A couple of years later he predicted very significant inflation among the world's top economies all the same time. Didn't happen.
2. Among people who pay much attention to Hedonic Adjustments the general beef is the results understate inflation not the opposite........cell phones, LCD TVs, clothes, shoes, rents, land lines etc. are included.
2.1. The bias AG talks about is ultimately not very important. The first Sony plasma TVs were ~$20K and very few sold. The first cell phones were thousands and thousands and very few sold. Items like LCD TVs @ $20K didn't/don't belong in CPI at all probably and if they do at all only vanishingly.
2.2 Related to 2.1 items that see the drastic price drops after introduction tend to be small actors in family budgets........big players being rent/mortgages, food, transportation, fuel etc.
In reverse order of importance.
1. Alan G. has been so wrong so often regarding inflation that his words mean little to me. Several years ago he predicted US inflation between 3-10% that would last for years. Didn't happen. A couple of years later he predicted very significant inflation among the world's top economies all the same time. Didn't happen.
2. Among people who pay much attention to Hedonic Adjustments the general beef is the results understate inflation not the opposite........cell phones, LCD TVs, clothes, shoes, rents, land lines etc. are included.
2.1. The bias AG talks about is ultimately not very important. The first Sony plasma TVs were ~$20K and very few sold. The first cell phones were thousands and thousands and very few sold. Items like LCD TVs @ $20K didn't/don't belong in CPI at all probably and if they do at all only vanishingly.
2.2 Related to 2.1 items that see the drastic price drops after introduction tend to be small actors in family budgets........big players being rent/mortgages, food, transportation, fuel etc.
EDS, I concur with your post. The federal minimum wage rate's purchasing power's much less a cause and much more a victim of U.S. dollar's inflation.
Increased costs of USA labor follows rather than leads the reduced purchasing power of the U.S. Dollar; (i.e. USA's labor costs do not stay abreast with the U.S. Dollar's inflationary rate).
Quote:
Originally Posted by RationalExpectations
True - but just to be clear, price increases in restaurants, the laundromat, and other low profit margin businesses in response to a $15 minimum wage is not inflation. Inflation is an increase in the general price level, not merely an increase in certain market segments sensitive to the minimum wage.
In econ 101 I was taught that inflation measures the general price level, whereas something like the minimum wage (or new technology) can affect only relative prices. The first couple posts by Mircea and 'Rational' summed it up.
Inflation is a function of monetary policy, not minimum wage policy.
The minimum wage in the US has never been high enough such that you would see the type of effects described in classical economic theory. Economists know from decades of empirical evidence that increases in the federal minimum wage have had minimal effects on employment. At the same time, it's also true that the majority of workers make above the federal minimum wage, so we would expect that there wouldn't be large changes in the labor market.
In general, demand for labor is inelastic (for now). If the minimum wage is too high, a couple of things tend to happen. 1: prices rise to account for increased labor costs. 2: companies cut hours and try to squeeze out more productivity from each worker. We see evidence of 2 happening in Seattle, though it hasn't been as bad as originally thought.
I think the federal minimum wage could be raised a few dollars, but not to $15/hour. IMO, it's good to have some minimum wage to prevent companies from outright exploiting workers in poor areas of the country the like Mississippi Delta.
... In general, demand for labor is inelastic (for now). If the minimum wage is too high, a couple of things tend to happen. 1: prices rise to account for increased labor costs. 2: companies cut hours and try to squeeze out more productivity from each worker. We see evidence of 2 happening in Seattle, though it hasn't been as bad as originally thought. ...
Drewjdeg, demand for labor can to some extent be variable and it's not generally inelastic.
You cannot point to any time in history when the federal minimum wage rate was effectively too high. I contend it fails to more fully reduce poverty among the working poor because its purchasing power is always insufficient.
(1) Minimum wage rate's not among the primary causes, but it's certainly a victim of inflation. When the U.S. Congress finally enacts an increase, its purchasing power's generally insufficient and it additionally continues to be more insufficient, until congress's next insufficient increase is enacted.
Refer to the first post of this discussion thread: due to increases of the minimum wage rate, prices do not generally rise more substantially; inflation of the U.S. dollar continues regardless if the minimum rate is or is not increased.
(2) A job's value is gauged by its wage's purchasing power. A job of lesser wage rate's purchasing power is a job of lesser value. I suppose the federal minimum wage rate critically affects the 20th and substantially affects the remainder of the 40th percentile of our nation's full-time workers.
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