…in a rational world, big Wall Street job cuts and the need for massive bailout money from the Fed would not correlate with a stock market regularly setting new highs. But Wall Street no longer exists in a rational universe. It exists in an alternative universe where Wall Street banks are allowed to put out a buy recommendation on a company and then trade its stock in their own Dark Pools; where trillions of dollars of risky stock derivatives are held by the country’s largest federally-insured bank; where initial public offerings of deeply indebted companies that have never made a dime of profits are hustled for listing on the nation’s stock exchanges; and where Wall Street is allowed by the U.S. Supreme Court to run a private justice system which draws an opaque curtain around the kinds of charges aggrieved investors are making against these Wall Street banks.
As we have stated previously, this is not so much a stock market as it is an institutionalized wealth transfer system moving money from the pockets of the 99 percent to the 1 percent who have concocted this market structure.
Millions of Americans are grappling with how to put food on their table while paying their 17 percent interest rate on their credit cards from these same Wall Street banks that are being provided loans from the New York Fed daily at 1.60 percent.
I started reading their blog because it seemed the most concerned by the strange doings in the repo market. The authors come off as a bit shrill, but there seems a lot to be shrill about — and even more to be deeply puzzled about, as this chart from Alhambra Investments shows:
I confess to a learned bias against commercial banks. (Don’t get me started on investment banks…) I have never found a good brick and mortar bank here in Miami, although I have had more luck with an online bank.
One of the striking features of the US economy is how much concentration we’ve allowed in major industries: national monopolies, regional monopolies (e.g. cable), oligopolies. Now come economists tying that trend to why raising the minimum wage doesn’t cause the job losses that micro-economics might predict: one of the things that makes market concentration profitable is that it allows firms to underpay workers (that is, pay them below their marginal productivity). So long as the raise in minimum wage doesn’t rise to a level exceeding the value of the work, businesses rationally decide to hold on to the workers.
Why is the employment effect of the minimum wage frequently found to be close to zero? Theory tells us that when wages are below marginal productivity, as with monopsony, employers are able to increase wages without laying off workers, but systematic evidence directly supporting this explanation is lacking. In this paper, we provide empirical support for the monopsony explanation by studying a key low-wage retail sector and using data on labor market concentration that covers the entirety of the United States with fine spatial variation at the occupation-level. We find that more concentrated labor markets–where wages are more likely to be below marginal productivity–experience significantly more positive employment effects from the minimum wage. While increases in the minimum wage are found to significantly decrease employment of workers in low concentration markets, minimum wage-induced employment changes become less negative as labor concentration increases, and are even estimated to be positive in the most highly concentrated markets. Our findings provide direct empirical evidence supporting the monopsony model as an explanation for the near-zero minimum wage employment effect documented in prior work. They suggest the aggregate minimum wage employment effects estimated thus far in the literature may mask heterogeneity across different levels of labor market concentration.
Unfortunately, many public law schools now charge comparable tuition (but some still don’t).
In any case, student debt of this magnitude is not sustainable, and even if it were the drag on people’s futures and life choices seems excessive. I think the first part of the answer is to bring down the cost of public college: we should return to the era, not so long ago, where you could pretty much finance your college education from a summer job.
Law school prices may still be too high even in that scenario, but at least the overall consequences for students wouldn’t be as bad.
What we do with the debt overhang, meanwhile, is a wicked problem. To simply forgive the debt would be a windfall for the debtors. As a taxpayer, I could live with that; the problem that bugs me is that it seems so unfair to the people who didn’t borrow or who paid down their debt, and those who made sacrifices to finance education or chose less-expensive and perhaps lesser alternatives…or who chose to forgo education entirely.
China held around [redacted] trillion of Treasuries as of the end of January, making it the largest of America’s foreign creditors and the No. 2 overall owner of U.S. government bonds after the Federal Reserve. Any move by China to chop its Treasury portfolio could inflict significant harm on U.S. finances and global investors, driving bond yields higher and making it more costly to finance the federal government.