Tuesday, May 4, 2010

A horror story of blood, sweat, toil and tears

Stephen King: Forget the sterile debates, we are all facing a future of austerity and sacrifice

In reality, British society is increasingly at the mercy of events elsewhere in the world. As for dealing with the gap between rich and poor, this is hardly straightforward. The widening gap owes a lot to the forces of globalisation. The integration of labour markets has increasingly led to manufacturing jobs shifting East, driving down wages in the West. The massive expansion of capital markets has led both to heightened instability and created large rewards for some of those involved in the financial industry. Until recently, the British economy managed to mask the gap between winners and losers stemming globalisation through easy access to credit but that will not be so easy in the future. [Stephen D. King is global chief economist at HSBC.]

Posted by drewster @ 10:25 AM (1780 views)
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9 thoughts on “A horror story of blood, sweat, toil and tears

  • matt_the_hat says:

    Not all of us Stephen (just moved to Hong Kong) King

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  • ‘A future of austerity’? Austerity has been with us for a long time. Henry Kreisler’s new book ‘Political Awakenings’ (New Press) features an interview with senior US judge Elizabeth Warren. She has a long history of dealing with bankruptcy cases in the US, has undertaken extensive research in the area. When she started in this area her assumption was that personal bankrupts were feckless and/or cheats but eventually she came to the following conclusions about the massive spread of bankruptcy.

    In real terms wages grew as the economy grew for the first 70-odd years of the 20th century. Since then a fully employed man’s wages have stagnated or declined, necessitating two-earner families. This means a sudden drop in income if the second earner has to take off time to look after somebody. In real terms people spend less on food (including eating out), clothing, furniture and appliances and more on housing – the median family spends 80% more (inflation-adjusted) on mortgage payments than they did a generation ago (more than that for families with children, since there is a premium on housing in the catchment area of a good school), 75% more on health insurance and 60% more on cars (1 job = 1 car, 2 jobs = 2 cars), and spend a lot more on childcare (unnecessary when there was only one earner).

    The two earners (with one often taking time off and not earning) have less left over than the one-earner family of the 1970s. If one loses his/her job the chances are lower now that he/she will find another that pays the same. They’re also less secure in terms of retirement. More and more middle class families are living paycheque to paycheque, dealing with debt collectors and late fees and paying 20%+ interest on credit cards.

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  • orcusmaximus says:

    @Icarus. Good analysis.

    Also lets not forget the damage to our society caused by handing our childcare over to strangers. To quote someone else (I forget who), equality in the workplace for Women was the biggest own goal in history.

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  • Why would Stephen King not write a book about “Money Creation” a process which is not controlled and not scientifically generated. Create unlimited amount of money and then spread the risk via complex financial instruments. This is no longer working now and the banks would probably want the taxpayer to take on the risk so they keep creating money that they can commission. Is that not going to be a book that people would like to read?

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  • 2.

    If you don’t already know icarus the Rockefeller Foundation funded the Women’s Liberation Movement.


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  • charlie brooker says:

    Anyone familiar with Jim Carrey’s “Fun with Dick and Jane” will know precisely what sacrifices this banker is refering to.

    In one scene Alec Baldwin’s character, Jack McAllister, talks to the media during a duck shoot. That scene itself was a reference to a George W Bush gaff where he talked about the war and then invited the press to watch his golf swing.

    In the scene the crooked tycoon McAllister is clearly not bothered in the slightest by events and taunts the public by going through a long list of extremely expensive properties he owns he suggests he might have to sell off as a “sacrifice”, following the Enron style-collapse of his own company (a collapse he secretly planned and shorted, leaving Carrey’s character to deal with the resulting media storm).

    Sacrifice? The only sacrifices bankers make are you and me, dear reader.

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  • icarus,

    You’re quite right. Elizabeth Warren has done some excellent research in this area. She also contributed towards the documentary film “Maxed Out: Hard Times, Easy Credit, and the Era of Predatory Lenders (2006)”. It’s an absolute must-see for an insight into the American situation at the height of the bubble.

    Note however that your figures are for the USA. The situation in Britain is different: house prices are much higher relative to incomes so the mortgage trap is worse; but at least we have free healthcare and a relatively generous social safety net. We do appear to be heading down the american path, unfortunately.

    [One slight correction: Warren is a lawyer, not a judge.]

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  • tenyearstogetmymoneyback says:

    Re his comments on immigration etc. If people are having to spend years at University
    then paying off University debts then saving for a deposit on a small flat, it is not surprising
    that not much time is left for them to start a family (and by that time they have probably got
    used to a few luxuries like meals out which they would want to give up.

    Having speculated about this I just found a goverment graph which almost proves the point


    Beyond 1990 it rises even more. How many educated 26 year olds are in a position to want
    to have children now ?

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  • ten years,

    I agree, but then how do they manage in America? Over there they’ve had sky-high tuition fees and plenty of immigration for a long time now. Yet they still manage to produce babies. Or is it only the proles who are shagging?

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