[slackline]

The fat get fatter 

[slackline]

Profits == Increased Investment.....theory not borne out by evidence.

[Duma]

Sounds like the sort of typical rich smug ruling-caste New Delhi lefty who is found to have their hand in the till when their career is over.

Sorry if that seems overbearingly dismissive. Lousy day over here.

It does indeed, the last line was beneath you. Hope your day improves.

[slackline]

I thought she was basically writing a short piece on the World of Work Report 2011: Making markets work for jobs report than being any sort of deep personal/professional opinion/insight (which at 159 pages I've not had time nor inclination to digest in full but have now skimmed through).

Isn't she saying the report shows that when profits increased there was not a similar increase in investment? 

The quick skim I've made of the report seems to be showing that as profits increased money wasn't put back into investing in the area of work, but rather paid out as dividends (or invested in finance markets which helped inflate that bubble).


Is there anything that shows the opposite (where profits have been re-invested) and/or anything that takes the same analytic approach but covers a longer time period?

[Bonjoy]

To me it begs the question – here’s some evidence to suggest the assumptions that politicians base their decisions on may be flawed, so where is the contrary evidence on which these assumptions are based?

[Duma]

Please don't. There's quite enough of us pinko liberals on here already - we need some sort of balance. 

[slackline]

What mean are things reverting to?

I get that having a return on a given investment allows for two things a) profit and b) reinvestment.

Doing b) will obviously diminish a), but isn't it a problem when b) takes a back seat to a), yet b) is being touted as the purpose/aim?

Basically the balance between a) and b) isn't right and has been tilting towards a) over the last few years covered by the report.

[slackline]

Thanks for that, with the phrase 'mean revert' I had in mind something along the lines of regression to the mean and was expecting some sort of value/figure to which it would be reverting.  Sounds more akin to an equilibrium point in the proportions of the GDP components (wage/profit/investment).

[miso soup]

Excellent thread, thanks to all concerned.  Having ploughed through the whole thing, a bunch of the links and also

Fool's Gold by Gillian Tett
(http://www.amazon.co.uk/Fools-Gold-Unrestrained-Corrupted-Catastrophe/dp/0349121893/ref=sr_1_1?ie=UTF8&qid=1329420347&sr=8-1)

and

23 Things They Don't Tell You About Capitalism by Ha-Joon Chang
(http://www.amazon.co.uk/Things-They-Dont-About-Capitalism/dp/0141047976/ref=sr_1_1?ie=UTF8&qid=1329420021&sr=8-1)

I still don't really get it but I'm now fairly sure nobody really gets it and that's part of the problem.

Going back to some more abstract points brought up earlier, can I ask you economists-

If the current problems are in large part due to the practice of making money by selling money getting way out of control, what would happen if we got rid of this idea entirely?  What if there was no interest and no public limited companies?  No making money off money and nobody owning anything they weren't directly involved in?  Both these things are relatively recent developments in the history of humanity and both had plenty of opponents when they were introduced.  I can see obvious benefits but I'm not convinced that they're not outweighed by the obvious drawbacks, and no interest is I believe a fundamental principle of Islamic banking so it's not really a radical idea.

[Falling Down]

Next...

[miso soup]

I'm not suggesting this as a plan, I'm just trying to understand how these forces operate in the wider sense and offering this as a hypothetical.  And asking because there seem to be people here who know more about these things than I do.

[philo]

Excellent thread, thanks to all concerned.  Having ploughed through the whole thing, a bunch of the links and also

Fool's Gold by Gillian Tett
(http://www.amazon.co.uk/Fools-Gold-Unrestrained-Corrupted-Catastrophe/dp/0349121893/ref=sr_1_1?ie=UTF8&qid=1329420347&sr=8-1)

and

23 Things They Don't Tell You About Capitalism by Ha-Joon Chang
(http://www.amazon.co.uk/Things-They-Dont-About-Capitalism/dp/0141047976/ref=sr_1_1?ie=UTF8&qid=1329420021&sr=8-1)

I still don't really get it but I'm now fairly sure nobody really gets it and that's part of the problem.

Going back to some more abstract points brought up earlier, can I ask you economists-

If the current problems are in large part due to the practice of making money by selling money getting way out of control, what would happen if we got rid of this idea entirely?  What if there was no interest and no public limited companies?  No making money off money and nobody owning anything they weren't directly involved in?  Both these things are relatively recent developments in the history of humanity and both had plenty of opponents when they were introduced.  I can see obvious benefits but I'm not convinced that they're not outweighed by the obvious drawbacks, and no interest is I believe a fundamental principle of Islamic banking so it's not really a radical idea.

I'm not 100% sure I understand what you mean but it looks like you have 2 things mixed up, capitalism and inflation.  Inflation by definition is the creation of money.  The prices people talk about are the consequence of the money creation. 

Throughout civilisation they have always had investments, are you talking about real investments made in the faith that you measure the risk carefully and could lose it all? or are you talking about the cronies we have in the banks that were bailed out that gamble with free money at 0% and  still fuck up everything.

The part about currencies is about the purchasing power.  The purchasing power goes down when you print it into oblivion, all fiat currencies will lead to economic disasters.

[miso soup]

Thanks philo, but I get that and without wanting to be unduly rude I wasn't thinking so much of you in my last post.

[Oldmanmatt]

Or, Philo, you could look at it like this...


2012-02-16-23-19-22_11A188BE-F97A-41A7-8CEF-FDBE3233B7B8 by oldmanmatt, on Flickr

[Oldmanmatt]

I agree with you Toby, I've had dealings with "Islamic" finance too.
The system, in the world today, is what it is.
And there can be little argument that this system has elevated most of the worlds population out of Medieval servitude.
Most, not all and certainly not evenly.
I feel that over the coming generations, the current model will change and will have to change.
I think the effect of technology can be seen in the evolution of social unrest.
I think a meta analysis of history, would show a growth in social unrest leads to greater equality (and equality is not a measure I would base solely on a bank balance, for example increased influence for the common man on the government of the day).
I see no reason this should not continue.
In fact, I think technology will accelerate the process.
I have yet to see an example in history of any attempt to control the population at large, which has lasted more than a generation or two.
People continue to demand more and by and large they get it.
The markets evolve, there will be regulation, imposed by popular demand, which will address the extremes of the markets.
Things will settle down, until the next big swing and the next new idea...
And the cycle will repeat, different in detail but similar in process.
I expect the cycle to accelerate, swinging around a steadily rising mean.
It's what has happened to date, isn't it?

Edit

To be clear, I'm positing, not concluding.

[Bonjoy]

Your analysis misses a vital point, energy. Society has progressed in the way you describe to date because there has been abundant cheap/free energy to leverage human endeavor hence supply the demands you describe. We no longer have vast amounts of cheap/free energy going forward, so shouldn't expect old assumptions to hold true.
This article gives a good overview of energy prospects http://physics.ucsd.edu/do-the-math/2012/02/the-alternative-energy-matrix/

[Oldmanmatt]

I'll try and keep the prosaic prose to a minimum, for once (failed already).

I deal with figures, graphs and Macro economics; far more than I do (more interesting) engineery things these days.

This is why I'm sick of them (sorry Slackers/Toby)...

Over the years, I've developed some opinions on the world economy; without bothering to learn the jargon.

Bonjoy, limited resources?

That depends on what you mean by resources. For example:-

There is very little that we use, that we truly destroy. I've been involved with a lot of material recovery technology development over the last decade. Necessity is the mother of invention and this is one area where I'm sure a new industry and economy will emerge.

The same is true of energy. The practicality of recovering unused/reusable hydrocarbons from the atmosphere may always prove too difficult, the development of alternative energy sources (I hate the term renewable), is gathering pace.
I've been consulting to a company developing electrical systems to replace many hydro/mechanical machineries (not as easy as it sounds), as well as developing battery technology and linked up with people developing fuel cells (commercial and academic). We've spent the last 7 years reducing absorbed power on those systems to the point we now use 50% less than comparable hydraulic systems (and as of last Thursday, I became their "Northern Europe and rest of the world"manager. YYFY).
This means the amount of energy required in the world will reduce over time.

What? I hear you say!

I have spent most of my life traveling and whilst we have a long way to go, I have no doubt that standards of living have risen across the globe; the pockets (big I admit) of genuine poverty grow smaller. It seems likely that the trend in the developed nations towards reduced birth rates, will gradually spread. It seems to me the global population will plateau, then fall at point X in the future.

GDP growth can continue, certainly for a long time. It's just that the base resources will change. When we say "Oil based" economy, we mean energy based. The source of energy will change (that may hurt in the short term).
When we talk about "Raw materials", at the moment we are talking about things dug out of the ground; in the future we might just mean things recovered from previous "Things".
Our ability to produce food increases, year on year. It might change, we may end up eating a lot of ants in the future.
Our awareness of our impact on the environment/climate increases, every year more people take it seriously (fast enough? Who knows).

I think we (all of us) have to give up on the idea of making money by selling money. It's far too dependant on the whims/fears of the traders.
I know that any economy is an artifice, a product of our imaginations; but that one is just silly.

I'm not sure if we've even scraped the surface of the available energy, have we?

I guess we will find out.

[Johnny Brown]

This article gives a good overview of energy prospects http://physics.ucsd.edu/do-the-math/2012/02/the-alternative-energy-matrix/

Very good link that yoot. No wonder we're so reliant on fossil fuels when the alternatives are so awkward.

[tomtom]

This article gives a good overview of energy prospects http://physics.ucsd.edu/do-the-math/2012/02/the-alternative-energy-matrix/

Very good link that yoot. No wonder we're so reliant on fossil fuels when the alternatives are so awkward.

Yes, - though the alternatives are often more awkward, as you put it JB, because so much has been invested (both in research and stakes) in existing methods. Solar PV is a reasonable example of this - as the cost has close to halved in the last 10 years (not including any subsidy things) partly due to tech developments but also due to with increased production volume - which is probably due to subsidy! (I'm not just talkign about the UK here..)....

Actually, the more I think about it, Awkward is a really good descriptor.. economically awkward, politically awkward, awkward for those large petro-chemical giants...

[Johnny Brown]

Yes, I had previously thought things are the way they are mainly due to fossil fuels being cheap. Actually they have a load more advantages that are harder to tackle. So awkward indeed, especially when you think about powering the likes of aircraft.

[shark]

Latest in from Onion news..

"Markets are reeling after the Dow dropped 1,000 points today following a shocking report ... that humans are fallible, imperfect creatures, frail and prone to error. Jittery investors rushed to withdraw their funds from all flawed mortal enterprise.
Traders realised they are no more than the flimsy machinations of a faltering species floating in an infinite sea of uncertainty. The Fed is incapable of intervening in the crisis, as it too is controlled by the trembling hand of man."

[Bonjoy]

I'll try and keep the prosaic prose to a minimum, for once (failed already).

I deal with figures, graphs and Macro economics; far more than I do (more interesting) engineery things these days.

This is why I'm sick of them (sorry Slackers/Toby)...

Over the years, I've developed some opinions on the world economy; without bothering to learn the jargon.

Bonjoy, limited resources?

That depends on what you mean by resources. For example:-

There is very little that we use, that we truly destroy. I've been involved with a lot of material recovery technology development over the last decade. Necessity is the mother of invention and this is one area where I'm sure a new industry and economy will emerge.

The same is true of energy. The practicality of recovering unused/reusable hydrocarbons from the atmosphere may always prove too difficult, the development of alternative energy sources (I hate the term renewable), is gathering pace.
I've been consulting to a company developing electrical systems to replace many hydro/mechanical machineries (not as easy as it sounds), as well as developing battery technology and linked up with people developing fuel cells (commercial and academic). We've spent the last 7 years reducing absorbed power on those systems to the point we now use 50% less than comparable hydraulic systems (and as of last Thursday, I became their "Northern Europe and rest of the world"manager. YYFY).
This means the amount of energy required in the world will reduce over time.

What? I hear you say!

I have spent most of my life traveling and whilst we have a long way to go, I have no doubt that standards of living have risen across the globe; the pockets (big I admit) of genuine poverty grow smaller. It seems likely that the trend in the developed nations towards reduced birth rates, will gradually spread. It seems to me the global population will plateau, then fall at point X in the future.

GDP growth can continue, certainly for a long time. It's just that the base resources will change. When we say "Oil based" economy, we mean energy based. The source of energy will change (that may hurt in the short term).
When we talk about "Raw materials", at the moment we are talking about things dug out of the ground; in the future we might just mean things recovered from previous "Things".
Our ability to produce food increases, year on year. It might change, we may end up eating a lot of ants in the future.
Our awareness of our impact on the environment/climate increases, every year more people take it seriously (fast enough? Who knows).

I think we (all of us) have to give up on the idea of making money by selling money. It's far too dependant on the whims/fears of the traders.
I know that any economy is an artifice, a product of our imaginations; but that one is just silly.

I'm not sure if we've even scraped the surface of the available energy, have we?

I guess we will find out.

Did you read the article? It goes a long way to answering your closing question.
It's not about a shortage of available energy it's about energy returned over energy invest (EROEI). As the article points out there are moons in the solar system with enough methane to run all our power stations for billions of years, but it's clearly never going to solve our problems.
We haven't scraped the surface of energy, how could we? We have more than scraped the surface of practically recoverable high density energy and the alternatives are a lot lot harder to work with.

[Oldmanmatt]

Yes I read the article.
It doesn't answer anything.
It is desperately weighted and glosses over many critical points and blandly assigns arbitrary values based on little more than opinion (hence the low score for nuclear).
Some categories are marked down as "eye sore" in the alternate matrix and no account is taken of such matters in the fossil fuel matrix.
Need I go on?
You continue to miss the main point.
Both population and consumption will plateau and then fall.
Technology will continue to advance (again the matrix marks down many possibilities for being unproven).
This article speaks only of what we might do today, it has nothing to say on where we may be in ten years time.
Or fifty.
Why would we cut off one stream instantly anyway?
Surely these things will develop in tandem, in parallel?
We can and will reduce pressure on the existing sources?
Are you really expecting the world to end in the next ten years?
I'm travelling, but I might be able to dig up some of the data on the new battery tech when I'm in Italy next week.
And tidal.
Don't forget tidal.
That was written off completely in that Matrix.
We've hardly even started there!
Talk about a vast untapped source of power...
Conventional aircraft, always going to be difficult.
But then, not all combustable fluids are fossil fuels.
I believe the septics have already conducted research on Slush Hydrogen propulsion.
Nah,
Call me the over optimistic Engineer, if you will, but I really don't see us running out of power...

[tomtom]

Call me the over optimistic Engineer, if you will, but I really don't see us running out of power...

until someone switches the sun off

[Johnny Brown]

Both population and consumption will plateau and then fall.

The $50,000 question being, will this happen nicely as a result of higher standards of living and declines in mortality etc, or in the hideous boom-and-bust overpopulation scenarios we witness in animal populations? We're rapidly running out of less developed countries for the developing countries to exploit whilst they get over the hump...