How does a consumer based economy operate without disposable income? This graph from calculated risk of MEW (mortgage extracted equity) relates almost one to one with disposable income for most households. Couple this with a flat median income since the 1970s and where is the disposable income coming from?
It is possible that the China Effect and its deflationary follow ons in consumption for manufactured goods has hid this to a certain degree. But even now it cannot hide the inflation that has been present in energy and food; even China is being hit with those. To make it worse economists and government tend to remove energy and food from their inflation numbers and only look at 'core inflation' which is basically inflation without all the inflationary stuff. Hardly a good metric unless you want to parade around like a peacock in feel good politics.
It still poses the problem of where the disposable income which is the engine for both growth, prosperity and investment in a capitalistic economy is going to come from in the near future. (reply)
It appears the Reserve Bank will up interest rates in a couple of weeks out of concern that inflation is becoming too high. One of the statements from the Prime Minister is that the core inflation is still between two and three percent. The problem with core inflation is that it is an inflation reading with all the stuff that is inflating taken out. Also known as inflation ex-inflation. (more)
Setting price controls is self-defeating and won't solve anything. Inflation is an issue. The deflationary China Effect has meant that white goods and manufacturing has dampened average inflation; yet industries like food, energy, health and education have been rapidly escalating in price. (more)
What a mess in Fiji. The WSJ is writing that the Fijian economy is declining because of it, tourism is down, and sugar exports are in danger, not to mention NZ taking hardline trade sanctions against Fiji. Australia has held out the carrots of aid, which have been ignored. There is also disquiet amongst Fijian elites who want the sanctity of the juducial system returned. (more)
Australia has always had a toe in globalisation simply because of the supposed geopolitical isolation, so Australians would look to foreign shores with awe and a glint of adventure. With the global economy integrating, the back-packing right of passage has become one of seeking economic opportunity.
The Lowy Institute's report on the Australia Diaspora in 2004 noted that it has become increasing white collar and even gold collar. While the diaspora may get public attention from time to time, gone unnoticed has been the increasingly globally integrated nature of the Australian workforce. (more)
The Meiji Restoration in Japan deposed the Tokugawa from dominating Japanese politics. The Tokugawa were just one of many competing daimyo, other powerful ones included the Chosu and Satsuma, who combined to overthrow the Tokugawa. The daimyo donated their lands to the national government and their domains became local government. One of the benefits of abolishing the old Shogunates was that all the tolls and tariffs between them were removed; it enabled the free movement of goods and labor at a national level. (more)
Futures trading came out of Edo (Tokyo) at the end of the Tokugawa Shogunate. It was actually a response to over-taxation, and the daimyo's, in order to generate revenue, forward sold rice at a fixed price to the markets.
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Via Laurent Guerby and Finance VOX is a paper on an options based contract from 1298. In reality it makes sense that the medieval era would develop a financial technology such as this, as so much of the costs of a transaction were unknown. (more)
From The Consumerist an interesting, but utterly logical, article:
How To Beat The Stock Market: Buy Companies With High Customer Satisfaction Scores
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