Archive for January, 2011
Some day in December, 1978, Birthplace of Rural Reform — Private Property in Xiaogang Village.
On the night of December 1978, all 18 of Xiaogang’s households met after dark in the biggest house in the village. After a short discussion, they signed or put their thumbprints on a 79-character document agreeing to divide the commune’s land into family plots.
Just what the Pilgrims did, in 1621-1623, in order to avoid starvation. The US socialists like to emphasize the Indians, who were indeed important, but usually ignore the starting communal farming that was failing, and the reversion to private property which succeeded.Read Full Post | Make a Comment ( None so far )
Tyler writes about income The Inequality That Matters.
He notes that first order is much less than discussed:
First, the inequality of personal well-being is sharply down over the past hundred years and perhaps over the past twenty years as well. Bill Gates is much, much richer than I am, yet it is not obvious that he is much happier if, indeed, he is happier at all. I have access to penicillin, air travel, good cheap food, the Internet and virtually all of the technical innovations that Gates does.
Tyler also focuses on how much of envy is local, with those nearby more than those out of your league. And there is also the difference between income inequality, and excessive growth at the top:
Income inequality has been rising in the United States, especially at the very top. The data show a big difference between two quite separate issues, namely income growth at the very top of the distribution and greater inequality throughout the distribution.
the richest 0.01 percent (the 15,000 or so richest families) had a share of less than 1 percent in 1974 but more than 6 percent of national income in 2007.
for 2004, nonfinancial executives of publicly traded companies accounted for less than 6 percent of the top 0.01 percent income bracket. In that same year, the top 25 hedge fund managers combined appear to have earned more than all of the CEOs from the entire S&P 500. The number of Wall Street investors earning more than $100 million a year was nine times higher than the public company executives earning that amount.
To me, it’s obvious that, for income inequality especially, the Big Banks should have been allowed to fail, wiping out equity investors, making bond holders lose some, converting debt into equity of new, lower valued firms, ending most big bonuses in finance.
Tyler disagrees, (without noting that the majority Democratic Party voted for these unfair bailouts for the irresponsible rich):
Had we not passed TARP and related policies, the United States probably would have faced unemployment rates of 25 percent of higher, as in the Great Depression.
This seems totally silly to me, not only without data, but without logic behind it. Certainly there is no reasonable narrative in that article — is there any narrative that discusses what is so terrible for non-finance folk about the Big Banks dying?
Had all the big banks gone bankrupt, like Lehman, only the overemployment in the “finance sector”, not Main Street, would be so negatively affected. There might not even be a 25% reduction in finance employment, much less other sectors. Recall that house construction DID have a huge drop, from 2006; and associated industry drops were, and still are, being recalculated in the economy.
I recall the Tyler and Alex debate, thru 2008 & 2009, on whether there was even a real “credit crunch”. (No final verdict?) If little or no credit crunch, no need for the Big Banks? The increased main street unemployment after banks fail would only come from businesses unable to get loans, right? With FDIC, none of the depositors would lose; and some bailout could/ would have guaranteed all term deposits.
The equity of all Big banks should have been wiped, the top earners all lose all bonuses and salaries reduced to “median wage” (take it or leave), and the payment obligations which caused the liquidity crisis/ insolvency should convert to new equity in the reconstituted after-bankruptcy firm, if any.No new business, merely least cost wrapping up of old business, tho allowing some rich angel (Buffet? China?) to re-capitalize any particular desired name.
If it is the top 0.01% “finance” earners that are undeservingly getting too much, certainly the best way to reduce it would have been letting the financiers go belly up.
Unfortunately, I’m sure there won’t be such a good chance again in my life — those guys are too smart and know how close they came to losing it, so are making sure the new rules offer them more protection, even if a little less top growth.
Thus, higher gross revenue/ asset management fees on the top 100 finance firms seems reasonable to usually libertarian me. Punitive taxes for the obvious past moral hazard seems like “social justice” that I can get behind.
Finally, good bankruptcy law IS one of the key gov’t functions all small gov’t advocates support–lack of such for TBTF banks is another gov’t failure.
Yosef Abramowitz, from the US, is just about to start building solar panels in the Israeli Negev desert. That’s great. I’ve long thought Israel should be doing this.
I also think gov’t parking lots in the USA should be covered with solar panels.
Too bad the panels are made in China; but no surprise.Read Full Post | Make a Comment ( 1 so far )