Saturday, July 13, 2013

All things being equal...

Members present:
[tiny] Brian, [tiny] Danak, [GIANT] Bickford
Income inequality.

We started on the topic of income inequality, and specifically why it is bad. Obviously, we want people to be equal, but what is the benefit to society beyond just helping people?

We found an interesting article that outlines the problem. Basically, the situation is that the top one or so percent has a large share of the money in the economy. There is only so much money that one person can spend, even counting your proclivity to purchase thousand-dollar vintage craft beer. Additionally, higher income people tend to save at a greater rate. This means that one high-income person has the capital hundreds or more lower-income people. They may make one hundred times as much of someone else, but they may have one thousand times more disposable income. The idea is that there is a certain cost to being a human,and once you get past that, it is all disposable income. Since we are a consumer-driven economy,that one person has much more purchasing (and tax) capability then they would ever use, hence they can be viewed as a drag on the economy .

It is important to note that we are not saying that people shouldn't be fairly compensated for their innovation and hard work. We are simply looking at this in economic terms. Bickford drew an apology to littering. He said that the problem does not come from one person littering, but the cumulative effect of many people littering is what makes the Indian cry.

The economy has tried to use credit to keep the consumption level up in order to make up for stagnating wages. That is not necessarily a problem until we have an economic downturn and people lose their jobs and cannot keep that house of cards stacking.

These folks in the higher-income bracket are saving, but they want the money to do something with their money. The finance industry has filled this gap and come up with more creative ways for these people to generate capital. These are your crazy financial instruments like CDOs.

This got us on the topic of philanthropy. Is it possible that your school wouldn't need that grant if the government was able to collect enough revenue? It might be interesting to see is a socialist country like Sweden has a different philanthropic climate.

Obviously, this is a huge problem which won't be solved here, but it is useful to understand your world a bit more.

Also, check out this nifty and slightly terrifying Family Budget Calculator from the Economic Policy Institute:

http://www.epi.org/resources/budget/

For next week:
1. The bond market may be falling apart
2. financing home repairs and improvement

Profit!

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