What is Occupy Wallstreet?

[kandrathe]

Every single person, even high-school kids, knew the housing market boom was going to end any day and that prices would drop dramatically when it did. There wasn't a single person who wasn't aware of this. This was risky investment at it's finest, and those who choose to do it helped sink our ship. I'm not a banker, and I don't have much sympathy for the big banks, but even I can see where the blame should be distributed; 50/50. If you purchase knowingly risky good to try and sell them at a higher price with full knowledge that the prices are being artificially inflated and you could be stuck with the hot potato... what you turn around and blame the guy who handed you the hot potato, or you blame yourself for taking the potato in the first place?

Yes, but. In 2007, the potato wasn't considered hot by the purchaser. If you see your home as an asset, and you paid $300K for one that is valued at $150K today, you still have the same utility of using this asset as a place to live. And, maybe you feel burned by the idea that your payments are for a $300K house. But, when you bought it, you knew the payments would be at that rate, and you probably could afford the payments and unless you have since lost your job, you can still make the payments on the product you bought. People erroneously thought that home values would always go up, and they were burned by that expectation (one perpetuated by government policy). But, yes, anyone who believes that "it's too good to be true", would have foreseen that the dramatic increase in home valuations was fiction. The same thing was true during the .com bubble, the era of VC investors flinging money at every pipe dream had to end one day.

If we buy a new car, the value of the car drops rapidly during the first 6 months, and after a year it's probably lost half it's value. I don't feel burned by that purchase, because it is expected.

But, populist anger aside. I think some of the anti-establishment crowd cherry pick their statistics. Consider the argument for wage stagnation against this chart;


The chart from the BusinessInsider article (taken from the St. Louis Fed, who got it from the BEA )was not adjusted for inflation because these are commingled with international profits so whose inflation rate would you choose, and in raw terms, aggregate corporate profits will always be hitting new highs in a growing economy, even one that is sputtering along at 1-3% growth. A better comparison is the profit to GDP ratio. So, yes, more in the 8-9% range compared to national income. I see this as some good news that our economy may not actually crash into depression. I don't know how you'd forecast anything other than record profits, given the downward pressure on wages and commodity costs. But, I've already said that it would be nice if "the 99%" were able to experience more participation in the risks and the rewards.

For CEO pay comparisons, you cannot just take the highest paid CEO, and compare that to the lowest paid worker. Here are the government statistics on CEO compensation. Mean annual wage for CEO's = $173,350, while for all occupations (including management) = $44,410. So, not really 350X the average worker. More like, 3.9X, which seems a bit more reasonable. The 2006, the national average household income for those with only high school graduation attainment was $36,835.

When you look at wages as a portion of GDP, you also need to consider GDP per capita which is encapsulated within that graph. In that same 1972 to 2005 period, GDP per capita is 3x higher, meaning that each worker is producing far more than 3x, and more like 6x more than they did in 1972.

When I got to digging into this chart;

I notice that the (slight) lag as a percentage of income is in State and Local taxes (including sales tax). That, and the chart is a bit misleading in that they break down the top quintile into four groups which visually over represents them. If you just look at the salmon colors and the light gray, which represents the progressive federal income tax you see what you'd expect to see. The bottom 20% pay <4%, the top 20% pay > 20%. I'm sure certain wealthy people who exist mostly from investment income pay more like the capital gains tax rate, but taxing capital gains is an involved discussion, as is other rate equity ideas, like removing the yearly cap on SSI tax.