April 15, 2014
How America Pays Taxes—In 10 Not-Entirely-Depressing Charts

The appropriate thing to say about taxes on April 15 is that they’re absolutely terrible. And yes, sure, they are, in a way. Filling out taxes is miserable (especially considering the IRS could probably do it all for you), watching money leave your bank account stinks, and seeing the difference between your adjusted gross income and your take-home pay is depressing.
But perhaps more than any other law, taxes are a keen reflection of what we value as a country. You know what you’re paying this year. Here’s some information about where your money’s going—and where it would go if you lived in Spain, or France … or in the U.S. 50 years ago.
Read more. [Image: Wikimedia Commons]

How America Pays Taxes—In 10 Not-Entirely-Depressing Charts

The appropriate thing to say about taxes on April 15 is that they’re absolutely terrible. And yes, sure, they are, in a way. Filling out taxes is miserable (especially considering the IRS could probably do it all for you), watching money leave your bank account stinks, and seeing the difference between your adjusted gross income and your take-home pay is depressing.

But perhaps more than any other law, taxes are a keen reflection of what we value as a country. You know what you’re paying this year. Here’s some information about where your money’s going—and where it would go if you lived in Spain, or France … or in the U.S. 50 years ago.

Read more. [Image: Wikimedia Commons]

11:55am
  
Filed under: Economics Tax Day Taxes 
April 3, 2014
How the Rich and Poor Spend Money Today—and 30 Years Ago

Every year, the Bureau of Labor Statistics tells us what the typical American spends on everything from his rent to his reading material. There’s just one problem. In a country with growing income inequality, the typical American leaves out a lot of Americans.
For example, poorest quintile of Americans spends about $22,000 each year. The richest quintile spends about $100,000 each year. (The richest 1 percent spends hundreds of thousands of dollars each year.) So to understand how Americans really spend our money, it helps to break us down into groups. And, since the BLS has been producing this spending survey for nearly 30 years, it’s even more helpful to track those groups over time to see how the American budget is changing.
Read more. [Image: Reuters]

How the Rich and Poor Spend Money Today—and 30 Years Ago

Every year, the Bureau of Labor Statistics tells us what the typical American spends on everything from his rent to his reading material. There’s just one problem. In a country with growing income inequality, the typical American leaves out a lot of Americans.

For example, poorest quintile of Americans spends about $22,000 each year. The richest quintile spends about $100,000 each year. (The richest 1 percent spends hundreds of thousands of dollars each year.) So to understand how Americans really spend our money, it helps to break us down into groups. And, since the BLS has been producing this spending survey for nearly 30 years, it’s even more helpful to track those groups over time to see how the American budget is changing.

Read more. [Image: Reuters]

April 3, 2014
Why Don’t The 1 Percent Feel Rich?

It’s hard out there for the 1 percent.
Okay, that’s not true at all. But they think it is. If you talk to people on Wall Street, most of them—even, in my experience, the ones shopping for Lamborghinis—will tell you that they’re “middle class.” Their lament, the lament of the HENRY (short for “high-earner, not rich yet”), goes something like this. You try living on $350,000 a year when you have to pay taxes, the mortgage on the house in a tony zip code, the nanny who knows how to cook ethnic cuisine, the private school tuition from pre-K on, the appropriately exclusive vacation, and max out your retirement and college savings accounts. There just isn’t that much cash left over each month once you’ve spent it all!
Well, sure. But burning through your money to live the lifestyle of the rich and unfamous doesn’t mean you’re not rich. Nor does it mean that the top 1 percent haven’t been pulling away from everyone else. They have. You can see that in the chart below from Berkeley economist Emmanuel Saez’s numbers on income inequality. It looks at how much different parts of the 1 percent have made as a share of total income. Now, the top 0.01 percent—that is, the 1 percent of the 1 percent—have increased the most, almost quintupling their income share in the last 40 years. But the “bottom of the 1 percent” (the 99 to 99.5 percent) have increased too. So both the super-rich and the merely rich are growing faster than everyone else.
Read more. [Image: Reuters]

Why Don’t The 1 Percent Feel Rich?

It’s hard out there for the 1 percent.

Okay, that’s not true at all. But they think it is. If you talk to people on Wall Street, most of them—even, in my experience, the ones shopping for Lamborghinis—will tell you that they’re “middle class.” Their lament, the lament of the HENRY (short for “high-earner, not rich yet”), goes something like this. You try living on $350,000 a year when you have to pay taxes, the mortgage on the house in a tony zip code, the nanny who knows how to cook ethnic cuisine, the private school tuition from pre-K on, the appropriately exclusive vacation, and max out your retirement and college savings accounts. There just isn’t that much cash left over each month once you’ve spent it all!

Well, sure. But burning through your money to live the lifestyle of the rich and unfamous doesn’t mean you’re not rich. Nor does it mean that the top 1 percent haven’t been pulling away from everyone else. They have. You can see that in the chart below from Berkeley economist Emmanuel Saez’s numbers on income inequality. It looks at how much different parts of the 1 percent have made as a share of total income. Now, the top 0.01 percent—that is, the 1 percent of the 1 percent—have increased the most, almost quintupling their income share in the last 40 years. But the “bottom of the 1 percent” (the 99 to 99.5 percent) have increased too. So both the super-rich and the merely rich are growing faster than everyone else.

Read more. [Image: Reuters]

March 31, 2014
How You, I, and Everyone Got the Top 1 Percent All Wrong

March 13, 2014
The Fed Absolutely Shouldn’t Give Up on the Long-Term Unemployed

re the long-term unemployed just doomed today or doomed forever?
That’s the question people are really asking when they ask if labor markets are starting to get “tight.” Now, it’s hard to believe that this is even a debate when unemployment is still at 6.7 percent and core inflation is just 1.1 percent. But it is. The new inflation hawks argue that these headline numbers overstate how much slack is left in the economy. That the labor force is smaller than it sounds, because firms won’t even consider hiring the long-term unemployed. That our productive capacity is lower than it sounds, because we haven’t invested in new factories for too long. And that wages and prices will start rising as companies pay more for the workers and work that they want.

In other words, they think that the financial crisis has made us permanently poorer. That the economy can’t grow as fast as it used to, so inflation will pick up sooner than it used to—and we need to get ready to raise rates. (Notice how that’s always the answer no matter the question).
There are only two problems with this story: There’s not much evidence for it, and we should ignore it even if there is. It’s pretty simple.
Read more. [Image: Reuters]

The Fed Absolutely Shouldn’t Give Up on the Long-Term Unemployed

re the long-term unemployed just doomed today or doomed forever?

That’s the question people are really asking when they ask if labor markets are starting to get “tight.” Now, it’s hard to believe that this is even a debate when unemployment is still at 6.7 percent and core inflation is just 1.1 percent. But it is. The new inflation hawks argue that these headline numbers overstate how much slack is left in the economy. That the labor force is smaller than it sounds, because firms won’t even consider hiring the long-term unemployed. That our productive capacity is lower than it sounds, because we haven’t invested in new factories for too long. And that wages and prices will start rising as companies pay more for the workers and work that they want.

In other words, they think that the financial crisis has made us permanently poorer. That the economy can’t grow as fast as it used to, so inflation will pick up sooner than it used to—and we need to get ready to raise rates. (Notice how that’s always the answer no matter the question).

There are only two problems with this story: There’s not much evidence for it, and we should ignore it even if there is. It’s pretty simple.

Read more. [Image: Reuters]

March 4, 2014
Yes, the Federal Reserve Makes Comic Books to Teach Kids About Finance and Money

Yes, the Federal Reserve Makes Comic Books to Teach Kids About Finance and Money

February 28, 2014
Bitcoin and the Myth of Tech Utopia

The belief that every human problem can be solved with software forgets the human element inside all software.
Read more. [Image: Reuters]

Bitcoin and the Myth of Tech Utopia

The belief that every human problem can be solved with software forgets the human element inside all software.

Read more. [Image: Reuters]

February 27, 2014
How the Fed Let the World Blow Up in 2008

It was the day after Lehman failed, and the Federal Reserve was trying to decide what to do.
It had been fighting a credit crunch for over a year, and now the worst-case scenario was playing out. A too-big-to-fail bank had just failed, and the rest of the financial system was ready to get knocked over like dominos. The Fed didn’t have much room left to cut interest rates, but it still should have. The risk was just too great. That risk was what Fed Chair Ben Bernanke calls the “financial accelerator,” and what everyone else calls a depression: a weak economy and weak financial system making each other weaker in a never-ending doom loop. 
But the Fed was blinded. It had been all summer. That’s when high oil prices started distracting it from the slow-burning financial crisis. They kept distracting it in September, even though oil had fallen far below its July highs. And they’re the reason that the Fed decided to do nothing on September 16th. It kept interest rates at 2 percent, and intoned that “the downside risks to growth and the upside risks to inflation are both significant concerns.”
In other words, the Fed was just as worried about an inflation scare that was already passing as it was about a once-in-three-generations crisis.
Read more. [Image: Reuters]

How the Fed Let the World Blow Up in 2008

It was the day after Lehman failed, and the Federal Reserve was trying to decide what to do.

It had been fighting a credit crunch for over a year, and now the worst-case scenario was playing out. A too-big-to-fail bank had just failed, and the rest of the financial system was ready to get knocked over like dominos. The Fed didn’t have much room left to cut interest rates, but it still should have. The risk was just too great. That risk was what Fed Chair Ben Bernanke calls the “financial accelerator,” and what everyone else calls a depression: a weak economy and weak financial system making each other weaker in a never-ending doom loop. 

But the Fed was blinded. It had been all summer. That’s when high oil prices started distracting it from the slow-burning financial crisis. They kept distracting it in September, even though oil had fallen far below its July highs. And they’re the reason that the Fed decided to do nothing on September 16th. It kept interest rates at 2 percent, and intoned that “the downside risks to growth and the upside risks to inflation are both significant concerns.”

In other words, the Fed was just as worried about an inflation scare that was already passing as it was about a once-in-three-generations crisis.

Read more. [Image: Reuters]

February 21, 2014
The Zombie Numbers That Rule the U.S. Economy

This Thursday the Conference Board, a global business association, released its monthly index of “leading economic indicators.” Like the unemployment and inflation, housing starts, G.D.P. changes and other figures, these numbers arrive in metronomic waves. Financial services like Bloomberg, Dow Jones and Reuters blast them out the moment they’re released. Stock markets will often respond within seconds. Commentators and policy makers attribute to them a near-cosmic significance. 
We act as if they are markers from time immemorial, but in fact they were invented for modern industrial nations after the Depression and World War II and are now seriously outdated.
Read more. [Image: Reuters]

The Zombie Numbers That Rule the U.S. Economy

This Thursday the Conference Board, a global business association, released its monthly index of “leading economic indicators.” Like the unemployment and inflation, housing starts, G.D.P. changes and other figures, these numbers arrive in metronomic waves. Financial services like Bloomberg, Dow Jones and Reuters blast them out the moment they’re released. Stock markets will often respond within seconds. Commentators and policy makers attribute to them a near-cosmic significance. 

We act as if they are markers from time immemorial, but in fact they were invented for modern industrial nations after the Depression and World War II and are now seriously outdated.

Read more. [Image: Reuters]

11:25am
  
Filed under: Economics US Economy GDP 
February 18, 2014
The U.S. Economy Might Be DoomedBut the Stock Market Isn't

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