Sunday, October 25, 2009
Contrary to most of what you hear on the radio and you read in newspapers and magazines the typical American retiree is not as dependent on the performance of the stock market as many people think. The following is a table of the sources of income among the second quartile of older Americans, that is, from the 50th to the 75th percentile:
Social Security benefits....... 54.60%
Other Income................... 02.60%
Public Assistance.............. 00.30%
As the above table illustrates very clearly this group — which is above median, although not at the top — is highly dependent on Social Security benefits for more than half of their income.Asset income is, on the other hand , is rather small. Obviously as one moves down to the third quartile and then the fifth quartile then the share of income derived from the stock market disappears.
Of course the portion of income derived from pensions is affected by the stock market but for most Americans the day to day fluctuations in stock prices are not as seminal as those on Wall Street would like us to believe that they are. What do you think?
Monday, October 19, 2009
Although the GDP was not developed to measure the level; of welfare of a society it has been often used to imply that a larger GDP/Capita means a better quality of life. There have been many efforts over the years to adjust the GDP and/or modify it is such a way as to make it responsive to some of the criticisms leveled at it.
One of the most successful efforts at creating an alternative measure of welfare is the Human Development Index (HDI) that was introduced 20 years ago. The HDI is a relatively simple index that combines the money measure of the GDP/Capita, life expectancy at birth and degree of literacy to rank countries relative to the combined score that they attain. Obviously the highest possible score is 1. This kind of ranking raises the importance of heath care services in addition to education but it deemphasizes the role of money income as the most important factor in determining the quality of life. The final rankings demonstrate clearly that it is possible to have a relatively low GDP/capita and yet enjoy a high quality of life if the access to health care results in longer and healthier life combined with a high degree of literacy.
Those among you who are interested in the latest such report by the UNDP should visit the following web site for the full report and all its data:
Components of Consumer Price Index
The Bureau of Labor Statistics provides the following description of the major eight categories and 200 categories that are currently used in computing the CPI.
Major groups and examples of categories in each are as follows:
* FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks)
* HOUSING (rent of primary residence, owners' equivalent rent, fuel oil, bedroom furniture)
* APPAREL (men's shirts and sweaters, women's dresses, jewelry)
* TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle insurance)
* MEDICAL CARE (prescription drugs and medical supplies, physicians' services, eyeglasses and eye care, hospital services)
* RECREATION (televisions, toys, pets and pet products, sports equipment, admissions);
* EDUCATION AND COMMUNICATION (college tuition, postage, telephone services, computer software and accessories);
* OTHER GOODS AND SERVICES (tobacco and smoking products, haircuts and other personal services, funeral expenses)."
Sunday, October 11, 2009
No one can doubt that the economic meltdown that started in the United States a couple of years ago and then spread all over the globe has been a wrenching experience. Tens of millions have lost their jobs, retirement plans had to be adjusted, poverty has increased, malnutrition has become more widely spread and governments have had to bailout banks, automobile manufacturing giants, subsidize agriculture and mortgages. Besides all the painful current adjustments that individuals and households have had to make, the future does not look to be very clear either, considering all the additional borrowing that governments had to undertake. As of this writting the US national debt is 12 Trillion dollars ( $12,000,000,000,000)and is slated to keep on increasing. What would be the effect of such a high level of indebtedness on both the domestic and ultimately the world economy is still not clear.
As a result of the severity of the global economic contraction many are questioning the viability of capitalism as it is currently structured. One inevitable result of these discussions is the emergence of the view that the US dominance is ending and that the unipolar moment has already come and gone. All of the above might prove to be true but as Mark Twain once said" The report of my death has been exaggerated".
American military power has been challenged in Iraq and Afghanistan, its political power is being challenged in Iran, the Arab world, parts of Latin America and in Eastern Europe. All of that while the value of the dollar sets new lows on the foreign exchange markets on a daily basis and its moral leadership is often questioned in the halls of the United Nations and in the Climate Change negotiations.
Yet inspite of all the above "negativism" eight of the top ten Global Brands according to the rankings by Business Week are common American household names. The results of these rankings come close to an unprecedented sweep and a recognition of American ingenuity and ability to innovate but it is also a clear demonstration of interdependence and a growing integration of the world economy.
The following is the list of the Top Ten:
1. Coca Cola (KO)
2. IBM (IBM)
3. Microsoft (MSFT)
4. GE (GE)
5. Nokia (NOK)
6. McDonald’s (MCD)
7. Google (GOOG)
8. Toyota (TM)
9. Intel (INTC)
10. Disney (DIS)
Sunday, October 04, 2009
The following is the full transcript of A Conscience of a Liberal of Oct. 3, 2009. Please read very carefully. Paul Krugman, the Nobel laureate, is not pleased with the latest unemployment report. What does the future hold?
I’m late on this, due to festschrifting. But another bad employment report yesterday. I’m feeling pretty bleak about this.
And the worst of it is that it was more or less predictable. I went back to my first blog post — January 6, 2009 — worrying that the Obama economic plan was too cautious. I wrote:
This really does look like a plan that falls well short of what advocates of strong stimulus were hoping for — and it seems as if that was done in order to win Republican votes. Yet even if the plan gets the hoped-for 80 votes in the Senate, which seems doubtful, responsibility for the plan’s perceived failure, if it’s spun that way, will be placed on Democrats.
I see the following scenario: a weak stimulus plan, perhaps even weaker than what we’re talking about now, is crafted to win those extra GOP votes. The plan limits the rise in unemployment, but things are still pretty bad, with the rate peaking at something like 9 percent and coming down only slowly. And then Mitch McConnell says “See, government spending doesn’t work.”
Let’s hope I’ve got this wrong.
Alas, I didn’t have it wrong — except that unemployment will, if we’re lucky, peak around 10 percent, not 9.
There was a lot of talk about health care being Obama’s Waterloo. It won’t, I think and hope. But stimulus is starting to look like Obama’s Anzio — the battle in which the American commander got himself into terrible trouble by being too cautious.
And right now Obama is pinned down in his too-small beachhead, taking heavy casualties.