You’re still being screwed–where are the occupiers of Wall St?

This is just unbelievable

See The Business Insider

These are, of course, US statistics, but the same trends are happening everywhere. The Aussies may have a respite but don’t bank on it lasting.

When are the 99% going to wake up? This is the sort of thing that led to the French aristocracy having a date with Monsieur Guillotine. And here, in western democracies, despite having the capacity to decide who rules our countries, we’ve allowed the union movement to be destroyed and our wealth to be stolen.

Let them eat cake

Corporate profit margins at an all-time high

Companies are making more per dollar of sales than they ever have before. (And some people are still saying that companies are suffering from “too much regulation” and “too many taxes.” Maybe little companies are, but big ones certainly aren’t).

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Profits graph: higher than ever

Fewer people with jobs

Continue reading “You’re still being screwed–where are the occupiers of Wall St?”

Chickens coming home to roost again

chickens
The following is an extensive extract from the Business Insider. I recommend ignoring my extract and reading the full post right here, but if you’re determined not to, go ahead and read my truncated version.

It’s a little technical and although my knowledge of economic theory is improving, I don’t understand all of it. But the implications for all of us are very serious. This is the stuff that John Key and Bill English seem able to gloss over but which continues to make a mockery of their ever-optimistic and perennially wrong economic forecasts. The 95% that I do understand isn’t really debatable. As you’ll find when you read it, there’s an inevitability to what is happening that lends it verisimilitude.

This is just part of the reasons why John Key gave up on catching up with Australia and Bill English made a virtue of our being poorer than our mates across the ever-widening ditch. The ill-informed, self-serving and uninspiring people you put in power don’t get it.

The last paragraph is spine-chilling, provocative, and hopefully will not come to pass.

Not yet.

Over to Raul Ilargi Mendoz…

…and quotes within quotes:
Continue reading “Chickens coming home to roost again”

How the 1% are cleaning out the rest of us: Part 2

Talk about hoisting yourself by your own petard!

Trickle down theory seems to have struck a roadblock
The graphs at the bottom of this post are from the New York Times. They’re self explanatory. What isn’t clear is how the movers and shakers of the world can be so bloody stupid. The figures are for the USA but it all applies here in New Zealand and throughout most of the world.

At the top of the graphic you can see that for the last 30 years wages have pretty much stayed the same relative to inflation for 82% of the workforce. The top 18% however, have creamed it. (The top 1% and even more avaricious 0.1% have really creamed it; we’ll get to them at another time.) As a result, in order to be able to buy all the flash cars, flat screen TVs, the ever more fancy houses, and the iPads  that media advertising bombards we peasants with, we’ve been borrowing up to our ears. Hence the current mess, and a situation where the people doing the lending are almost as deep in it as the borrowers.

Almost, but not quite. In some cases, not at all. (Continued below the graphic).

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how the 1% are screwing the rest of us

Monumental stupidity from the top

What is mind-bogglingly and infuriatingly stupid about all this is that–as you can see from the second graph–it’s all happened before and it was perfectly clear that it was going to happen again. Not only that, it happened in the previous century (the 1800s) as well! More than once!

Sheesh.

Here’s how it works–or not

Continue reading “How the 1% are cleaning out the rest of us: Part 2”

Catching up with Australia

In your dreams John: not at this rate

Yeah, I know they’ve given up on the promise. The disgusting thing is they shouldn’t have. We can catch Australia. But the longer we leave it the more difficult it becomes – the people we need to do it will all be in Australia.

Since I last investigated our dreadful economic performance the plot’s thickened. The table below is the most current comparison of GDP per capita for the richest 51 countries in the world, click on it to see it full-size. The figures in the table are taken from the CIA’s World Factbook. You may not be enamoured of the CIA, but they do their homework.

You can find us quite easily. The reason I’ve made it so long is that we’re at the very bottom.

per capita gdg table

With a bit of Googling you’ll find figures from other organisations showing us at a higher position than 51st. It depends upon several things including how GDP is defined, how recent the figures are, and whom they include in the stats. Nevertheless, the trend is the same. Steadily downward and with no sign of relief.

Most often our position is quoted as in the 20s. That’s because they usually only include OECD countries. We’ve been overtaken by a whole gaggle of countries which aren’t even in the OECD.

Mr Bollard and Mr Key please note

    • Since the 2007 update Australia has moved up 5 places, New Zealand have moved down 5 places.
    • Before leaping to the conclusion that the Aussies are just digging dollars out of the ground bear in mind that minerals (including oil & gas) comprised only 8% of their GDP in 2007. 7% according to some.

But GDP isn’t everything

Yes, I hear your cry. There are more important things than GDP. I’d rather live in New Zealand than in wealthy Qatar or Hong Kong. I’ve been to both those places and they’re not my cup of tea. Nevertheless, although the best things in life aren’t things, there comes a point where relative wealth becomes important. When a country can no longer afford the level of health care, policing, educational resources, defence and welfare its people expect, then per capita GDP becomes a very big issue.

When the outflow of our most valuable people becomes a steady torrent our collective future well-being is at risk. We need these people creating wealth for New Zealand so that we can repay our rapidly rising debt. I need my grandchildren to live in my country.

We need these people to continue the precious New Zealand can-do, string-and-barbed-wire, punch-above-our-weight culture built up over a dozen decades and more.

We’re paying for our education system to churn out people to build Australia; the medical and dental professions are becoming dominated by people for whom English is a second language; soon we’ll fall behind Botswana and Khazakstan economically.

It matters alright.

  • To re-iterate, if you wish to find New Zealand in a hurry on this chart, we’re at the bottom of the table at #51.
  • When I was very young we were #2.

Pray tell me:

  • What resources do Liechtenstein, Luxembourg, Jersey, Singapore, Hong Kong, Switzerland and Iceland have that New Zealand can’t match or exceed?
  • Why can’t we compete, for instance, with the Danes? The Swede’s say about Denmark “Stand on a box and you can see their whole damn country.” Like many other economies on this list they have very few natural resources: just good people.
  • Greenland! Before the crash were they selling ice as well as fish? They’re down now but watch them rebound.
    If you want answers to these questions, check my links below.

We need action

A few hints:

  • More research and development.
  • Proactive mentoring in entrepreneurial skills for small and medium sized businesses.
  • Sort out our education services. Less technology, more 3 Rs. Get people with real work experience onto the education coalface.
  • Jobs, jobs, jobs.
  • What happened to the war on bureaucracy? Bring the public sector into the real world.
  • In case it’s escaped notice, the much-maligned employers are the people who create jobs and wealth.
  • Less arts and law degrees, more science and engineering.
  • Less time wasters in the student body.
  • Less welfare, more work.
  • Less borrowing for hire purchase, more for investment.
  • Less consumption, more work and education.
  • Did I mention jobs?

For more insight into where our country is going wrong read my series: New Zealand’s Economic Decline and watch Sir Paul Callaghan’s inspirational presentation Beyond the Farm and the Theme Park.

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Recovery? Don’t hold your breath

John Key, in yet another triumph of hope over experience, maintains that we’re on an economic roll. There are some minor problems with Mr Key’s super-optimism. Not unlike the now abandoned “catching up with Australia” pledge, or the “Working for Families is communism by stealth” backtrack.

Over 50 years of voting I’ve been a swinging centre-right voter and a supporter of capitalism. I’m a slow learner. I didn’t notice that the system that once worked very well is now absolutely broken.

When Henry Ford invented the production line and started churning out Model T cars in vast numbers, he concluded that if he wanted to create an economic and transport revolution he needed to ensure that his car was affordable. More specifically, he had sufficient insight to realise that success depended upon the people who built the car being able to afford to buy it.

For several decades this was understood by economists, money managers, reserve bankers, and capitalists. For the market to work successfully ordinary workers had to be sufficiently well paid that they were empowered to be consumers. It’s no use producing vast quantities of junk if nobody can afford to buy it. Trouble is, sometime in the last 20 or 30 years they’ve forgotten the basic message. The ratio between the incomes of the top earners and the average worker has increased enormously, but for 10 or 20 years the inflation adjusted wage of the average worker hasn’t increased. The top earners are nevertheless creaming the system more and more with every passing day and they’re apparently oblivious to the fact that they’re strangling the golden goose.

From SmartBlog

In 2010, the average annual wage for U.S. workers in production operations was $33,770 while the average CEO pay in S&P 500 companies was $11,358,445. CEO pay was 336 times more than the average employee.

The Wall Street crowd and their cronies around the Western World are sucking more blood out of the system than they were before it all turned pear-shaped in 2007-8. Before your money bailed them out. It’s unsustainable.

From MarketWatch

The left-wing Institute for Policy Studies found that the CEOs of the job-cut companies on average took home nearly $12 million in 2009, above the $8.5 million brought in by the average CEO of an S&P 500 company. The study found that 72% of the announced layoffs came at a time when the company was reporting positive earnings.

“This reflects a broader trend in Great Recession Corporate America: squeezing workers to boost profits and maintain high CEO pay,” said the study.

The growth occurring in the US and elsewhere is a jobless recovery. How does China remain an engine for growth when the people who buy their products have empty wallets? Sure, they can generate some internal consumption from their massive surplus, but that won’t last long when their own individuals and local authorities have been indulging in a borrowing spree which has created a massive real estate bubble. Negative equity is knocking on China’s door too.

For 2 or 3 decades the underpaid workers in the Western World have been borrowing to buy stuff that they previously could afford to buy for cash, or that didn’t exist, or that they chose not to buy. Now those people are pulling up the drawbridge. Countries like China and Germany who have relied on manufactured exports for growth are heading for a train wreck.

Millions of people around the world have lost their jobs and their homes. The rich are getting richer after the system that feeds their greed was bailed out using the taxes of those who’ve been destroyed. A revolution is overdue and I suspect that it’s coming.

From the horses’ mouths

The Wall Street Journal and Forbes Magazine are hardly bastions of Liberalism, nevertheless they can spot a trend when it hits them in the eye.

As you can see from this graph from the WSJ, the rich are doing OK. In 1965 they earned, on average, a mere 24.2 times the average employee’s income. In 2009, long after the recession hit, it was 185.3 times, and if you check this link at Forbes magazine, you’ll see that the thin red line is now on the rise again.

These people just don’t get it.

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CEO salary disproportionate growth

Someone else who understands the problem

Rod Oram
Rod Oram. He gets it.

Rod Oram is a controversial figure to many. Mostly he irritates the revisionist old school ignoramuses who got us into the mess we’re in. Those folk in farming organisations who believe that producing more lamb and milk powder will get us back into First World status aren’t too keen on Rod either. He sums up some of what I’ve been trying to raise awareness of in this article in the Sunday Star Times:

Time for a cultural revolution

My only gripe with Rod is that he doesn’t make enough noise about the issues. He—along with folk like Colin James, Fran O’Sullivan, Gareth Morgan and Leighton Smith—could make a big difference if they screamed louder.

The Treasury gets it

It’s a pity they don’t have the ears of our great and glorious leaders. Your taxes pay their salaries but it’s to no avail; the bureaucrats and the politicians are pulling in different directions.

John Whitehead, Secretary to the Treasury, gave a speech in November telling it like it is. These two images, which accompanied his talk, illustrate clearly the problems Just Wondering has been set up to address. When the Treasury Secretary tells the Government publicly that we’re in deep trouble perhaps we should be paying attention and perhaps we should be demanding that Mr Key and Mr English do too.

The must-read text of the full speech is here along with many more graphs showing the sorry state this country is in and indicating the desperate state we’re plummeting into.

GDP gets an F minus; this is the problem

I hate Powerpoint, but I’ll bite the bullet to inflict upon you these two images from the presentation. They say it all:

New Zealand long term growth record
"In 1950 we had the third-highest GDP per capita ranking among OECD countries. Last year we were ranked 22. Tumbling down a league table tells us that our competitors are doing things smarter and better. Imagine the outcry if a sports team suffered such a decline? The figure here shows that, since 1950, our average rate of growth – at 1.3 per cent – has been the lowest in the OECD. Treasury."

R&D gets an F too; could do better but just isn’t trying

This is a substantial part of the reason we have the problem. R&D is the key to the beginning of the beginning of restoring our prosperity.

New Zealand's pitiful R&D spending
If anything is going to get us out of the mess we're in, it's innovation leading to high tech businesses earning enough to pay high wages to skilled people. It isn't going to happen if we continue like this. It's not only business that's the problem. Government doesn't put enough into R&D either.