I remember sitting in my bosss office. His base salary was in the range of $350K, his bonus was divided between cash ($700K in a good year) and stock options (valued at $700K in a good year based on the Black–Scholes equation). It was 2008 and he was going through how a fall in the dollar would cause a resurgence in American manufacturing, and the size of the economy would be roughly equivalent to the size of the economy in 2001. 2001 was not such a bad year, he said. But I sat there, schocked, that he of all people did not notice that between 2001 and 2010, when he argued the recover would come, there had been a huge redistribution of wages from the poor to the rich. It might not be worse for the _average_ american, because the average american would include people like him, who earned millions in bonuses. But it would be worse for the median american, who earned $50,000 or so. He was either intentionally or unintentionally completely blind to this fact, and willing to fire anyone who spoke up against his assessment that 2010 would be at least as good for the average american as 2001 was. The banking sector has not recovered quite the way he predicted. Part of this is due to overdue regulation. But more of this is due to the fact that the middle class is still overburdened and can not spend as they have in the past. Rather than my former boss taking a job at 2.5 million dollars a year at JC Morgan Chase, the economy could have put money in the hands of people who would spend it. But it did not. There is another shoe to drop. robertreich.org/post/72265646495
Posted on: Tue, 11 Mar 2014 06:25:14 +0000
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