Economic inequality is holding back economy

Discussion in 'Economy' started by ipaps, Dec 14, 2011.

  1. ipaps
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    ipaps Member

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    Hi, I'm from Taiwan. I don't really have a solid background in Economics, nevertheless here's what I want to say.

    I my opinion. Economic inequality is the major cause of current economic regression.

    First, I want to point out that investment itself doesn't contribute to real economy. Solid economy depends on consumption. That is to say, one cannot invest in something and make money without consumers buying the end product.

    What happens when the majority of GDP goes to a few people and corporations?

    The result is that, while the majority of people have their ability to consume reduced, the rich and the corporations, who are unable to spend all the money, invest the excess money somewhere in hope to make more. This means that interest rate will be low because there's too much idle money (not helping consumption) around. Reduced consumption means declined demand for products (not because people have less needs, they just can't afford to satisfy them), which then create a surplus of man power, resulting in high unemployment.

    This is bad because high unemployment further make consumers poorer, reduce consumption power and demand even more.

    In my country, corporations usually raise price when material price rise, but almost never lower it for any reason. Worker's salary is forever thinning out by inflation. Salary rise never keeps up, for the reason that industry will move to other country. Further more when corporations needs to cut cost in hard times, they usually look to workers first. This is really imbalanced and is, imo, the main reason behind the growing gap between the rich and the poor.

    My government is doing little in either easing inflation or taking care of labors. On one hand they kind of think people can't find jobs because they lack competency, on the other hand they spend tax money lavishly, sometimes ridiculously just to digest budget, saying that government spending can boost economy automatically. I don't think so because the majority of those money still goes to corporations.

    To summarize, I think corporations cannot make money without consumers buying their products, yet their typical behaviors are thinning out consumers ability to purchase. If the government(s) don't make efforts to stop this feedback, economy will be bad.
     
  2. Mr. H.
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    Mr. H. Diamond Member

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    Here in the U.S., our President is not nurturing an environment that encourages proper investment.

    End of lesson.
     
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  3. editec
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    editec Mr. Forgot-it-All

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    I think you are basically right, ipaps.

    I'll go a step further and suggest to you that as it regards the US economy, it was the steady erosion of working class purchasing power that set us up for the great real esates meltdown that lead to the great BANKSTERS' meltdown, that is leading us (I think) in a worldwide DEPRESSION.

    If one wants to have a consumer drivens capitalst economy, the balance in wealth between the investment class and the consuming classes cannot get too far out of balance before that imbalance causes problems in the workings of the market.


    The USA has been pursuing SUPPLY SIDE economic and tax policies for AT LEAST the last 30 years and that imbalance in wealth has screwed the world's economy.
     
  4. Mad Scientist
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    Mad Scientist Deplorable Gold Supporting Member Supporting Member

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    Stopped reading right there.
     
  5. Mr. H.
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    Mr. H. Diamond Member

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    Be nice. It's ipaps mere first post. :D
     
  6. expat_panama
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    expat_panama Silver Member

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    Welcome to the forum and thank you for your ideas. You say you don't know economics very well. When you don't know about something it's better to ask questions. After you learn about it then you'll have "something to say" that will make much more sense.
     
  7. PoliticalChic
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    PoliticalChic Diamond Member

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    Equality refers to position before the law.

    A nation can have economic equality or it can have prosperity.

    Not both.
     
  8. PoliticalChic
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    PoliticalChic Diamond Member

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    1. "it was the steady erosion of working class purchasing power..."
    Bogus.

    a. “…in 1967 only one in 25 families earned an income of $100,000 or more in real income, whereas now, one in six do. The percentage of families that have an income of more than $75,000 a year has tripled from 9% to 27%. But it's not just the rich that are getting richer. Virtually every income group has been lifted by the tide of growth in recent decades.” Great American Dream Machine

    2. "...that set us up for the great real esates meltdown that lead to the great BANKSTERS' meltdown,..."
    Bogus-er.

    Government deciding who should have homes is the cause, starting with FDR's GSE's and right through Carter (CRA) and Clinton's HUD policies....and blocking of reform by Frank and Dodd....
    ...purely coincidental that all of the above are Democrats.

    3. "... the balance in wealth between the investment class and the consuming classes cannot get too far out of balance..."
    Bogus-est.

    Balance???
    None of your business how much another makes.
    In America, the more you work, the more you earn.
    Period.
     
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  9. expat_panama
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    expat_panama Silver Member

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    That's your opinion.

    OK, it's my opinion too but lots of people on this thread want total state control of allocating resources. It's like my saying that if IPAPS doesn't know about economics then he should ask before telling everyone about it. My opinion only; lots of people (especially those who like state control of the economy) don't know anything and keep talking anyway.
     
  10. PoliticalChic
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    PoliticalChic Diamond Member

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    That's why we're here....
    ....we have to be the Mother Teresa of economic education.

    (Oops...was that blasphemous???)
     

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