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By LOUISE STORY
Published: August 21, 2010
David A. Moss, an economic and policy historian at the Harvard Business School, has spent years studying income inequality. While he has long believed that the growing disparity between the rich and poor was harmful to the people on the bottom, he says he hadn’t seen the risks to the world of finance, where many of the richest earn their great fortunes.
Now, as he studies the financial crisis of 2008, Mr. Moss says that even Wall Street may have something serious to fear from inequality — namely, another crisis.
The possible connection between economic inequality and financial crises came to Mr. Moss about a year ago, when he was at his research center in Cambridge, Mass. A colleague suggested that he overlay two different graphs — one plotting financial regulation and bank failures, and the other charting trends in income inequality.
Mr. Moss says he was surprised by what he saw. The timelines danced in sync with each other. Income disparities between rich and poor widened as government regulations eased and bank failures rose.
“I could hardly believe how tight the fit was — it was a stunning correlation,†he said. “And it began to raise the question of whether there are causal links between financial deregulation, economic inequality and instability in the financial sector. Are all of these things connected?â€
Published: August 21, 2010
David A. Moss, an economic and policy historian at the Harvard Business School, has spent years studying income inequality. While he has long believed that the growing disparity between the rich and poor was harmful to the people on the bottom, he says he hadn’t seen the risks to the world of finance, where many of the richest earn their great fortunes.
Now, as he studies the financial crisis of 2008, Mr. Moss says that even Wall Street may have something serious to fear from inequality — namely, another crisis.
The possible connection between economic inequality and financial crises came to Mr. Moss about a year ago, when he was at his research center in Cambridge, Mass. A colleague suggested that he overlay two different graphs — one plotting financial regulation and bank failures, and the other charting trends in income inequality.
Mr. Moss says he was surprised by what he saw. The timelines danced in sync with each other. Income disparities between rich and poor widened as government regulations eased and bank failures rose.
“I could hardly believe how tight the fit was — it was a stunning correlation,†he said. “And it began to raise the question of whether there are causal links between financial deregulation, economic inequality and instability in the financial sector. Are all of these things connected?â€
The reporter then goes on to say that
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"Moss is among a small group of economists, sociologists and legal scholars who are now trying to discover if income inequality contributes to financial crises."
The normal economist on the pro business side poo poos this.
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R. Glenn Hubbard, for instance, who was the top economic advisor to former President George W. Bush, said income inequality was not the culprit in the most recent crisis.
“Cars go faster every year, and G.D.P. rises every year, but that doesn’t mean speed causes G.D.P.,†said Mr. Hubbard, dean of the Columbia Business School and co-author of the coming book “Seeds of Destruction: Why the Path to Economic Ruin Runs Through Washington, and How to Reclaim American Prosperity.â€
“Cars go faster every year, and G.D.P. rises every year, but that doesn’t mean speed causes G.D.P.,†said Mr. Hubbard, dean of the Columbia Business School and co-author of the coming book “Seeds of Destruction: Why the Path to Economic Ruin Runs Through Washington, and How to Reclaim American Prosperity.â€
But if you take a look at all the resent financial Scandals there seem to show a link between them and Bubbles and the widening gab between the rich and poor.
Yes compare to 3th world standards the poor in America are well off with being able to have their TV's DVD players and Cell Phones" But they come with a different standard or living too.
I just got a Free Cell Phone from Virgin Mobile with 200 free minutes a month.It's a basic phone and if I want to send or receive text messages, or access the Internet, I have to buy a prepaid card or have my them charge my debit card. Several Cell phone providers are providing such services using funds from the Universal Service Fund charge on your phone bill.
Since Cell phones are replacing pay phones and many household are now going without land lines, the Lifeline Assistance program, that for years allow those on limited incomes have free access to a phone that allow them to make 30 calls a month, and then 110 cent a call thereafter.
I would have had to go with Lifetime Assistance if I lived by myself. My Daughter gave me a cell phone to use on her family plan, because of she was worry that I would get sick and not able to find a pay phone to call family for help. The $15 a month I pay them was well worth it, as we rarely had to worry about using all the minutes on their plan each month. I needed to get my own phone now, as she is getting a divorce and her husband will no longer keep her and me on his plan. I'm going to miss my old phone with it's keyboard for texting and camera.
The poor often end up paying more for electronics and large household items like beds frames and sofa's on monthly installments. When you're working poor, it's near impossible to save up enough for decent furniture, so they get pray on by Rent to Own stores.
I'm just lucky that I still have most of the furniture and stereo system, that I was able to get when I split up with my ex. Jonwin and I are actually looking at getting rid of at least one dresser and various other small items around the house to make room for everything I'm getting, when my father estate is finally settled. With some painting and wall repairs you would never know I was poor by the antiques I inherited, passed down through the generations. Many of my friends have to apply for a furniture grant to just get a bed when they move out of shelters and into a section 8 apartment.
So what do you say about this, the financial conservatives here in the Asylum?