Economy | - Part 5

On Wealth, Means, and Medians

Anyone familiar with the math behind mean (average) vs. median as it relates to the graphic below from this CNN/Money story about individual net worth around the world would immediately conclude that we’ve got quite the wealth inequality problem here in the U.S., at least relative to other developed nations.

The much higher average net worth relative to median net worth in the U.S. is rivaled only by Sweden and Denmark, whereas, countries such as France, Finland, Italy, Japan, and the U.K. actually have a higher median than mean.

The math is best demonstrated by the case of Bill Gates walking into a room full of ordinary Americans. While the median net worth would be virtually unchanged, the average net worth of those people would go up by an extraordinary amount (e.g., if  the room has ten ordinary people, the average net worth would rise to somewhere around $4 billion).

Though a stubborn housing bubble (that may not always be so stubborn) has much to do with it, Australia certainly seems to have the whole wealth thing figured out.

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New Hope for the Economics Profession

I’ve not yet perused House of Debt: How They (and You) Caused the Great Recession, and How We Can Prevent It from Happening Again, but it’s just been added to my summer reading list as there are apparently two more U.S. economists thinking a bit more outside of the box, said box still keeping most dismal scientists baffled about how we arrived at our current slow growth, widening inequality predicament.

Here are authors Atif Mian and Amir Sufi in an interview with the Financial Times.

Of course, Mian and Sufi have a blog by the same name and, while Larry Summers thinks their analysis is pretty good, he has few kind words for their policy prescriptions.

This is real progress, I think…

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The Labor Department reported that U.S. employers added to their payrolls at a solid pace in May, paced by a big increase in the health care industry, and the unemployment rate was unchanged at a five-and-a-half year low of 6.3 percent.

Employment returned to pre-recession levels with the rise of 217,000 in payrolls last month that was in line with analysts’ estimates and this comes after a gain of 203,000 in March and a downwardly revised increase of 282,000 in April.

The winter slowdown is now clearly over as the three-month average payrolls gain has increased from just 150,000 in February to 234,000 in May.


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ECB Launches NIRP

Here’s European Central Bank President Mario Draghi’s press conference where he explains how the central bank plans to spur lending by charging member banks to keep their money, a policy that will soon become known as NIRP (Negative Interest Rate Policy).

Some say Draghi looks a little bit like a frog and, given that, it’s natural to recall the “frog in boiling water” analogy as it relates to monetary policy around the world.

Go back ten years and few could have imagined what central bank policy makers have already done and what they are planning to do, all in an effort to combat the biggest credit bust the world has ever seen and, importantly, one that they oversaw.

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