Skip to content

William Dare

How do I know what I think until I see what I say? ― E.M. Forster

  • Home
  • About Me
  • Quotations
    • Quotation Categories
      • Make You Think
      • On Action
      • On Art
      • On Artists
      • On Attention
      • On Attitude
      • On Beginners
      • On Beginning
      • On Being
      • On Being Creative
      • On Being Different
      • On Being Uncreative
      • On Belief
      • On Business
      • On By Experts
      • On Certainty
      • On Challenge
      • On Change
      • On Chaos and Disorder
      • On Children
      • On Climate
      • On Collaboration
      • On Commitment
      • On Common Sense
      • On Communication
      • On Confidence
      • On Connections
      • On Conservatism
      • On Consistency
      • On Constraints
      • On Contradiction
      • On Copying
      • On Courage
      • On Creativity is…
      • On Criticism
      • On Curiosity
      • On Daring
      • On Desire
      • On Deviation
      • On Discovery
      • On Doubt
      • On Dreaming
      • On Education
      • On Effort
      • On Emergence
      • On Enjoyment
      • On Enthusiasm
      • On Experience
      • On Experimenting
      • On Experts
      • On Exploration
      • On Failure
      • On Fear
      • On Foolishness
      • On Fragility
      • On Genius
      • On Goals
      • On Habit
      • On Hope
      • On Ideas
      • On Ignorance
      • On Illumination
      • On Imagination
      • On Impossibility
      • On Incubation
      • On Individuality
      • On Innovation
      • On Inspiration
      • On Intuition
      • On Invention
      • On Judgment
      • On Knowledge
      • On Leaping
      • On Learning
      • On Letting Go…
      • On Listening
      • On Living Creatively
      • On Love
      • On Luck
      • On Madness
      • On Managing
      • On Memory
      • On Mind
      • On Necessity
      • On Openness
      • On Opportunity
      • On Originality
      • On Passion
      • On People
      • On Perception
      • On Persistence
      • On Play
      • On Potential
      • On Preparation
      • On Problems
      • On Progress
      • On Quantity
      • On Questions
      • On Quotations
      • On Rationality
      • On Rearrangement
      • On Resistance
      • On Risk
      • On Robustness of Ideas
      • On Science
      • On Seeing
      • On Self
      • On Simplicity
      • On Stimulation
      • On Subconscious
      • On Success
      • On Surprise
      • On Talent
      • On Talent vs. Genius
      • On Time
      • On Tension
      • On Truth
      • On the Future
      • On Understanding
      • On Thinking
      • On Unpredictability
      • On Vision
      • On Wisdom
      • On Wonder
      • On Words
  • The Last Dream
    • New World
William Dare

Tag: wage

Wealth Disparities and Debt

Despite a steady increase in aggregate output/ GDP over the past several decades income inequality has risen exponentially. From the 1970’s to present, earnings of the top 5% of citizens have risen steeply while earnings of the bottom 95% have stagnated (adjusted minimum wages is lowest in history). As it stands a small fraction of citizens own the vast majority of capital assets, liquid or illiquid, while the other 80% of the US population owns 7% of the wealth. Compounding multiple decades of real wage stagnation has been a continual rise in the adjusted consumer price index. Due to stagnating wages and rising prices, the savings rate for citizens– specifically the low and middle class– has seen a chronic decline and historical lows.  As a result of these financial pressures the US population has accrued massive consumer debt to maintain consumption, of which 33% is revolving credit (such as credit cards) and 67% is comprised of loans (such as mortgage, car, student, etc).

Due to the dollar’s position as the worlds reserve currency, the past several decades have seen rising global account imbalance as foreign investment in the US steadily increases. Most of this foreign investment wealth originated from gains in the emerging Asian markets and increases in commodity, energy, and oil prices. With the US leading the world in developed financial markets, foreign investors are attracted to the financial liquidity of US markets. In addition, they perceive US assets as safe investing due to its reliable historical growth and stable government.

In the years following the tech bubble collapse, many believed that the low interest rates post 2001 would cause a run on the dollar. Instead foreigner investors looked for other American safe-assets. This high demand, combined with competitive greed and lack of regulation, led to the development of debt markets and their financial instruments and securities such as CDO’s and CDS’s. (Financial institutions placed additional pressure on mortgage lenders to find borrowers to meet demand. With rising real estate prices, this wasn’t difficult. These debt markets had exceptional yields and were thought to be reliable and safe assets.)

Due to bargaining power imbalances and habit persistence over income, lower class wage inequality has risen with increases in aggregate output. The rise in income inequality has been much greater than the rise in consumption inequality due to borrowing and taking on debt; that is, despite low and middle class income income/ wage stagnation, borrowing has allowed their consumption to increase, fueling domestic demand. However, because the lower class does not have access to international financial markets, they must borrow from wealthy domestic lenders. (From 1998-2008 private credit from other financial institutions, i.e. credit cards, loans, etc., rose from 37% to 150% of GDP, whereas private credit from deposit money banks rose marginally from 55% to 65%.) The sustained increase in consumption from borrowing has kept domestic demand high and increased aggregate output. It also created a deficit as domestic lenders acted as intermediaries for foreign investors who sought financial safety in the dollar in the form of liquid financial assets. Over the years this system has exacerbated inequality as lower class consumption and income decreased to the benefit of the wealthy as their consumption and investment assets increased.

Author WilliamPosted on February 17, 2012Categories Economics, UncategorizedTags account, balances, borrowing, current, debt, economic, economics, income, inequality, labor, lending, macroeconomic, saving, savings, theory, wage, wealthLeave a comment on Wealth Disparities and Debt

Post History

  • June 2022 (3)
  • May 2022 (1)
  • April 2022 (2)
  • March 2022 (1)
  • October 2021 (2)
  • September 2021 (4)
  • August 2021 (1)
  • June 2021 (1)
  • May 2021 (3)
  • February 2021 (3)
  • January 2021 (3)
  • November 2020 (1)
  • September 2020 (6)
  • August 2020 (6)
  • July 2020 (6)
  • June 2020 (5)
  • May 2020 (16)
  • April 2020 (12)
  • March 2020 (18)
  • February 2020 (20)
  • January 2020 (6)
  • December 2019 (4)
  • November 2019 (10)
  • October 2019 (3)
  • September 2019 (14)
  • August 2019 (13)
  • July 2019 (13)
  • June 2019 (16)
  • May 2019 (2)
  • April 2019 (2)
  • March 2019 (10)
  • February 2019 (6)
  • January 2019 (21)
  • December 2018 (11)
  • November 2018 (17)
  • October 2018 (25)
  • September 2018 (13)
  • August 2018 (9)
  • July 2018 (9)
  • June 2018 (9)
  • May 2018 (4)
  • April 2018 (19)
  • March 2018 (7)
  • February 2018 (25)
  • January 2018 (8)
  • December 2017 (1)
  • November 2017 (17)
  • October 2017 (11)
  • August 2017 (1)
  • May 2017 (5)
  • April 2017 (2)
  • March 2017 (3)
  • February 2017 (12)
  • January 2017 (8)
  • December 2016 (20)
  • November 2016 (13)
  • October 2016 (22)
  • September 2016 (3)
  • August 2016 (2)
  • June 2016 (1)
  • May 2016 (6)
  • April 2016 (3)
  • March 2016 (4)
  • February 2016 (1)
  • January 2016 (2)
  • December 2015 (1)
  • November 2015 (1)
  • September 2015 (1)
  • July 2015 (1)
  • February 2015 (3)
  • January 2015 (1)
  • November 2014 (2)
  • October 2014 (2)
  • February 2014 (1)
  • December 2012 (1)
  • November 2012 (4)
  • October 2012 (6)
  • September 2012 (10)
  • August 2012 (11)
  • July 2012 (15)
  • June 2012 (20)
  • May 2012 (20)
  • April 2012 (30)
  • March 2012 (23)
  • February 2012 (34)
  • January 2012 (3)
  • December 2011 (16)
  • November 2011 (11)
  • October 2011 (9)
  • September 2011 (14)
  • August 2011 (17)
  • July 2011 (7)
  • June 2011 (14)
  • May 2011 (15)
  • April 2011 (35)
  • March 2011 (16)
  • February 2011 (26)
  • January 2011 (20)
  • December 2010 (25)
  • November 2010 (24)
  • October 2010 (36)
  • September 2010 (26)
  • August 2010 (6)
  • July 2010 (8)
  • June 2010 (7)
  • May 2010 (22)
  • April 2010 (42)
  • March 2010 (16)
  • February 2010 (11)
  • January 2010 (9)
  • December 2009 (19)
  • November 2009 (17)
  • October 2009 (26)
  • September 2009 (20)
  • August 2009 (24)
  • July 2009 (2)
  • June 2009 (9)
  • May 2009 (16)
  • April 2009 (23)
  • March 2009 (11)
  • February 2009 (15)
  • January 2009 (18)
  • December 2008 (15)
  • November 2008 (24)
  • October 2008 (24)
  • September 2008 (12)
  • August 2008 (7)
  • July 2008 (6)
  • June 2008 (1)
  • May 2008 (8)
  • April 2008 (9)
  • March 2008 (9)
  • February 2008 (12)
  • January 2008 (13)
  • December 2007 (28)
  • November 2007 (30)
  • October 2007 (36)
  • September 2007 (24)
  • August 2007 (10)
  • July 2007 (14)
  • June 2007 (8)
  • May 2007 (6)
  • April 2007 (8)
  • March 2007 (8)
  • February 2007 (10)
  • January 2007 (18)
  • December 2006 (15)
  • November 2006 (15)
  • October 2006 (13)
  • September 2006 (6)
  • August 2006 (10)
  • July 2006 (7)
  • June 2006 (6)
  • May 2006 (6)
  • April 2006 (2)
  • March 2006 (4)
  • February 2006 (3)
  • December 2005 (3)
  • November 2005 (3)
  • October 2005 (3)
  • September 2005 (3)
  • August 2005 (8)
  • July 2005 (4)
  • June 2005 (10)
  • May 2005 (5)
  • April 2005 (7)
  • March 2005 (2)
  • February 2005 (2)
  • December 2004 (2)
  • November 2004 (2)
  • October 2004 (1)

Topics

  • achievement
  • action
  • belief
  • christianity
  • creativity
  • culture
  • death
  • depression
  • dreams
  • economics
  • education
  • epistemology
  • evolution
  • existence
  • existentialism
  • experience
  • freedom
  • friends
  • girls
  • goals
  • god
  • growth
  • happiness
  • inequality
  • inspiration
  • knowledge
  • language
  • learning
  • life
  • love
  • macroeconomics
  • meaning
  • mind
  • motivation
  • nausea
  • Nietzsche
  • party
  • passion
  • people
  • personal development
  • personal growth
  • philosophy
  • poem
  • poetry
  • policy
  • politics
  • power
  • psychology
  • quote
  • quotes
  • rambling
  • random
  • rant
  • reason
  • reflection
  • relationships
  • religion
  • school
  • science
  • skepticism
  • society
  • sociology
  • story
  • success
  • summer
  • thinking
  • thought
  • thoughts
  • truth
  • wealth
  • will to power
  • wisdom
  • words
  • writing
  • youth
  • Home
  • About Me
  • Quotations
    • Quotation Categories
      • Make You Think
      • On Action
      • On Art
      • On Artists
      • On Attention
      • On Attitude
      • On Beginners
      • On Beginning
      • On Being
      • On Being Creative
      • On Being Different
      • On Being Uncreative
      • On Belief
      • On Business
      • On By Experts
      • On Certainty
      • On Challenge
      • On Change
      • On Chaos and Disorder
      • On Children
      • On Climate
      • On Collaboration
      • On Commitment
      • On Common Sense
      • On Communication
      • On Confidence
      • On Connections
      • On Conservatism
      • On Consistency
      • On Constraints
      • On Contradiction
      • On Copying
      • On Courage
      • On Creativity is…
      • On Criticism
      • On Curiosity
      • On Daring
      • On Desire
      • On Deviation
      • On Discovery
      • On Doubt
      • On Dreaming
      • On Education
      • On Effort
      • On Emergence
      • On Enjoyment
      • On Enthusiasm
      • On Experience
      • On Experimenting
      • On Experts
      • On Exploration
      • On Failure
      • On Fear
      • On Foolishness
      • On Fragility
      • On Genius
      • On Goals
      • On Habit
      • On Hope
      • On Ideas
      • On Ignorance
      • On Illumination
      • On Imagination
      • On Impossibility
      • On Incubation
      • On Individuality
      • On Innovation
      • On Inspiration
      • On Intuition
      • On Invention
      • On Judgment
      • On Knowledge
      • On Leaping
      • On Learning
      • On Letting Go…
      • On Listening
      • On Living Creatively
      • On Love
      • On Luck
      • On Madness
      • On Managing
      • On Memory
      • On Mind
      • On Necessity
      • On Openness
      • On Opportunity
      • On Originality
      • On Passion
      • On People
      • On Perception
      • On Persistence
      • On Play
      • On Potential
      • On Preparation
      • On Problems
      • On Progress
      • On Quantity
      • On Questions
      • On Quotations
      • On Rationality
      • On Rearrangement
      • On Resistance
      • On Risk
      • On Robustness of Ideas
      • On Science
      • On Seeing
      • On Self
      • On Simplicity
      • On Stimulation
      • On Subconscious
      • On Success
      • On Surprise
      • On Talent
      • On Talent vs. Genius
      • On Time
      • On Tension
      • On Truth
      • On the Future
      • On Understanding
      • On Thinking
      • On Unpredictability
      • On Vision
      • On Wisdom
      • On Wonder
      • On Words
  • The Last Dream
    • New World
William Dare Website Built with WordPress.com.
  • Follow Following
    • William Dare
    • Already have a WordPress.com account? Log in now.
    • William Dare
    • Customize
    • Follow Following
    • Sign up
    • Log in
    • Report this content
    • View site in Reader
    • Manage subscriptions
    • Collapse this bar