Economics Questions

Re: Decreasing living standards

Rooster — Fri, 24 Jul 2009 17:26:18 GMT

bearing01:

Savings are not just in dollars. Investments like stocks and bonds or gold/silver are also savings. Those things don't really buy themselves (except for compounding or dividens). You have to forego consumption in order to buy them. That's saving.

Even if the savings rate reflected all of these investments, which it doesn't, it would still be a flow measure, not a stock. In other words, it does not tell you net worth.

Re: Decreasing living standards

bearing01 — Fri, 24 Jul 2009 17:16:58 GMT

Savings are not just in dollars. Investments like stocks and bonds or gold/silver are also savings. Those things don't really buy themselves (except for compounding or dividens). You have to forego consumption in order to buy them. That's saving.

Edit: When stocks or bonds yield an investment return/dividen/coupon, that is income. You can consume it or reinvest/save it. Reinvestment is not consuming. It's saving.

Re: Decreasing living standards

Rooster — Fri, 24 Jul 2009 16:36:17 GMT

bearing01:

>>What makes you think most people are broke? Because someone on the news lost their house?

Because the savings rate is near zero and most people have tens of thousands of dollars of credit card debt. There is too much debt right now. People used debt and/or home equity as their bank machine to finance their standard of living. Because they thought they had appreciating asset prices they did not feel it necessary to save. Just cash out the equity, taking on bigger loans, to finance their life. All because their asset prices were rising during a bubble. When you have debt and no savings you are broke.

Not necessarily, because that doesn't account for peoples' net worth (assets). The savings rate is measuring a flow.

Re: Decreasing living standards

bearing01 — Fri, 24 Jul 2009 16:21:01 GMT

>>What makes you think most people are broke? Because someone on the news lost their house?

Because the savings rate is near zero and most people have tens of thousands of dollars of credit card debt. There is too much debt right now. People used debt and/or home equity as their bank machine to finance their standard of living. Because they thought they had appreciating asset prices they did not feel it necessary to save. Just cash out the equity, taking on bigger loans, to finance their life. All because their asset prices were rising during a bubble. When you have debt and no savings you are broke.

Re: Decreasing living standards

Natalie — Fri, 24 Jul 2009 15:44:06 GMT

Kakugo:
The Roman Empire faced exactly the same problem: people didn't wake up in Rome one morning to find the Goths runsacking the place and paupers starving in the streets. It was a very long and slow slide which lasted more than two centuries and European standards of living only started to recover after a thousand year.

The fall of the Roman Empire was a good thing for Western Europe in the long run, despite initial social upheaval. It led to decentralization of power, elimination of slavery (and later serfdom), more sound monetary policy, vigorous trade and more incentives to find labor and cost saving methods of production that led to the industrial revolution. As for the standards of living, you can find prosperous societies even during the Dark Ages. If only the federal government went the way of the Roman Empire...

Re: Decreasing living standards

Kakugo — Fri, 24 Jul 2009 09:13:36 GMT

I'll dig up the link later but it was a bit different.

It simply said that, given the nature of the present depression, living standards are bound to slowly decrease in the long run. Why?

Because welfare states, facing shrinking revenues and ever increasing expenditures, will either cut "services" they supply or increase taxation, bringing about less disposable income. Because consumption has increased too rapidly in recent years, funded by criminal economic politics. Because enterprises have come to rely too much on cheap credit instead of good old style capital accumulation, not to mention downright handouts from governments. Last but not least people have become much less self-reliant than they once were: they've come to expect the government to help them out continously, no bar that, they've come to believe to be owed by the government big time.

The Roman Empire faced exactly the same problem: people didn't wake up in Rome one morning to find the Goths runsacking the place and paupers starving in the streets. It was a very long and slow slide which lasted more than two centuries and European standards of living only started to recover after a thousand year.

Re: Decreasing living standards

Rooster — Thu, 23 Jul 2009 18:03:50 GMT

bearing01:

As for all the new material things that have been developed since the 70's, sure we got more today. But can we afford it? Most people are broke, whereas in the 70's they weren't.

What makes you think most people are broke? Because someone on the news lost their house?

Re: Decreasing living standards

bearing01 — Thu, 23 Jul 2009 16:33:27 GMT

Well, I herd the other day that the standard of living has fallen since the 70's. Is this true?

Today both husband and wife have to work to keep up with the mortgage and other costs of living. In the 70's the mother stayed home and took care of the kids.

As for all the new material things that have been developed since the 70's, sure we got more today. But can we afford it? Most people are broke, whereas in the 70's they weren't.

Also compare the wealth and standard of living in the 70's compared to the 40's and then 2010 to 70's. Yes we have advanced a lot since the 70's, mostly in the area of cell phones, internet and automobiles, but we probably saw as much advancement between the 40's to 70's also.

IMO, I believe the internet and cell phones have revolutionalized the world. The internet being perhaps one of the greates inventions comparable to the automobile, airplane, telephone and electricity. I can't compare the specific technologies that were developed between the 40's to 70's. I wasn't around before the 70's.

Re: Decreasing living standards

Esuric — Thu, 23 Jul 2009 15:29:46 GMT

asusenior:
According to the Grandfather Economic Report, the average American's standard of living has not budged for the last 35 years when adjusted for taxes and inflation. Actually the upper teir has seen their living standard go up sharply during that time, but the rest have suffered - particularly the lower class. What has gone up during that time is our ability to take on an enormous amount of debt. That gives a false impression of accumulted wealth.

That's absolutely wrong, they're measuring gdp per capita in real terms, or so they think. The standard of living is much higher now for everyone relative to the 70s.

Re: Decreasing living standards

krazy kaju — Thu, 23 Jul 2009 15:23:19 GMT

No, it is a complete falsehood. You can't claim that living standards are falling when the people, even the poor, are buying more TV sets, more cars, more computers, etc. People who are living worse lives cannot afford more of such products. The problem with these so-called political experts who claim that living standards have been falling is that they have not looked at the impact of technological advancement - they only look at price inflation vs. wage increases. Obviously, real wages can fall while living standards rise due simply to the expansion of products that improve life.

Re: Decreasing living standards

Rooster — Thu, 23 Jul 2009 03:16:57 GMT

asusenior:

According to the Grandfather Economic Report, the average American's standard of living has not budged for the last 35 years when adjusted for taxes and inflation. Actually the upper teir has seen their living standard go up sharply during that time, but the rest have suffered - particularly the lower class. What has gone up during that time is our ability to take on an enormous amount of debt. That gives a false impression of accumulted wealth.

http://mwhodges.home.att.net/family_a.htm#saving

I could tell right away that is flawed because it starts out talking about household income instead of per capita.

Re: Decreasing living standards

Spideynw — Thu, 23 Jul 2009 02:53:05 GMT

asusenior:

According to the Grandfather Economic Report, the average American's standard of living has not budged for the last 35 years when adjusted for taxes and inflation. Actually the upper teir has seen their living standard go up sharply during that time, but the rest have suffered - particularly the lower class. What has gone up during that time is our ability to take on an enormous amount of debt. That gives a false impression of accumulted wealth.

http://mwhodges.home.att.net/family_a.htm#saving

Standard of living is more than taxes and inflation. It is impossible to measure "standard of living". Standard of living includes technological advances. Automotive, camera, computer, and machine technologies are much more advanced today than they were 30 years ago, let alone all the advances in inventory control and cost control we have learned.

Re: Decreasing living standards

al gore the idiot — Thu, 23 Jul 2009 02:48:14 GMT

According to the Grandfather Economic Report, the average American's standard of living has not budged for the last 35 years when adjusted for taxes and inflation. Actually the upper teir has seen their living standard go up sharply during that time, but the rest have suffered - particularly the lower class. What has gone up during that time is our ability to take on an enormous amount of debt. That gives a false impression of accumulted wealth.

http://mwhodges.home.att.net/family_a.htm#saving

Re: Decreasing living standards

Rooster — Thu, 23 Jul 2009 01:31:32 GMT

If by earlier times you mean 2 years ago, then there might be something to it, but it still wouldn't be very significant on a long time frame. I'm guessing they're talking about a generation ago, or even longer. That is clearly false if you just look around. More specifically, look at consumption including goods that were not available in the past, not just income.

Re: Decreasing living standards

DanielMuff — Thu, 23 Jul 2009 01:24:39 GMT

Could you be more specific?