"it is possible to have comparable growth with different distribution"

How? 65% of spending is "middle class" or "consumer".

A model of the form of economy with "rich" and "poor" was the UK in the 50s. Not much growth then, war debts, loss of manufacturing, loss of world markets, low home demand, lopsided income distribution, no asset appreciation.

My parents bought a house in '52. Sold it for the same price in '59.

"it is possible to have comparable growth with different distribution"
How? 65% of spending is "middle class" or "consumer".

According to Krugman, the wealthy can make that up through their extravagant lifestyle and huge government expenditure on the military. He was emphasizing that he was speaking as an economist and that this is theoretically possible, so one shouldn't assume that things will just go back to the way they were. The game could change drastically and still work economically, measuring growth in terms of nominal GDP.

The 65% spending is actually a tricky number and it isn't exactly the way it sounds, i.e., a bunch of consumers going to the malls and spending on consumables. It includes a lot of maintenance costs and hidden costs.

"huge government expenditure on the military"

Requires large taxes and cheap cannon fodder (press gang or draft).

Hadn't noticed the rich were willing to sacrifice their lifestyle to support "large military expenditures." And at some stage even the rich will discover "large military expenditures" in not equivalent to "security" or "effectiveness". Especially in "asymmetrical warfare" -- that is invading & holding raggedy assed countries where the locals can fight on the cheap - stones, ieds, anfo explosives, etc.

"Wind of Change" - http://en.wikipedia.org/wiki/Wind_of_Change

The US defense stated budget is over a half trillion, and there's a lot of black stuff that's buried. In addition, the wars have been largely off budget. All this has been 100% financed during the Bush years. Moreover, the war spending was supplemented by contract work to cronies instead of using the regular military, at an estimated 8x markup. That's probably too conservative an estimate when the truth comes out.

No indication that Obama is thinking of cutting back. He is just shifting ops from one theater to another. At least there may be less corruption involved.

A large part of the wealth of the country concentrating at the top is through transfers from the public (present and future taxpayers, as well as the inflation tax) to the military-industrial-governmental complex. And, of course, the financing is done through the financial sector, which takes a cut.

The wealthy don't have to pay because their taxes have be gutted, and they all have offshore tax havens, too.

IN addition, a lot of the petro-dollars return to the US military-industrial complex through weapons sales.

This is an ongoing scam that shifts wealth to the top under the guise of national security that no pol is willing to call into question.

Get rid of the parasites.

"Get rid of the parasites, make California its own country, turn back the Okies at armed checkpoints on the border, quit sending bountiful tax monies to redneck hick flyover ruffians," right, right. That was like fifteen whole minutes ago. Now somebody slipped on a dog turd and landed full-length on an ant bed, and it's time to run screaming to the Elected Ones in DC to bail them out.

eom

But it can't last for ever. In the long run all companies go broke.

eom

Some of us have heirs and some of us don't.

The Church of England owns a lot of real estate in London & elsewhere. It is leased out in 125-year time slots.

Some people have very long investment timelines.

“The Playboy reader invites a female acquaintance in for a quiet discussion of Picasso, Nietzsche, jazz, sex.” - Hugh Hefner

The various rescue packages orchestrated by the Fed and Treasury have injected trillions of dollars of public funds into buoying investment demand to keep asset value from crashing further than it has. So far this has not generated any corresponding increase in velocity that would increase values substantially. This process is continuing as FIRE (finance, insurance, and real estate) continues to suck up public funds first "to avoid disaster" and then "to get things back on track." Meanwhile, the wars go on and are getting ramped up, while military spending is set to increase.

This has to be seen as a massive transfer of public (taxpayer) funding to the private sector at virtually no cost to to the private sector and at substantial risk to taxpayers, who are unlikely to see much return of principal, let alone interest or appreciation.

Moreover, this has been transpiring behind the curtain with no transparency, regulation, oversight, or accountability.

Ian sums it up in Economic Consequences of the Bailout Plan By: Ian Welsh FDL October 3, 2008

Note that Japanification was always the plan of the "neconomy", or Busheconomy if you prefer. It was always the endgame? Why? Because Japanification makes the winners of the final game permanent. All extra money in the system will be pumped to the people who made the bad decisions that crashed the prior economy, they will stay in power and because there isn't a dynamic economy left, no one is likely to rise to replace them

We've been having the "Japanification conversation" since 2001, when the question was "what happens to deal with the stock bubble."

UK in 18th, 19th & 20th centuries.

The last time the state issued such IOUs -- the only time since the Great Depression -- was in 1992.

The last time California was broke was in 1992. Thus, it seems to be almost normal.

I thought that California can't print money but they can print IOUs, which is the same.

_{--Storm brings only richness with it}

notice that the graphs say that the graphs don't represent real situations.

The US economy is still the most highly developed in the world by a long shot. BRIC (Brazil, Russia, India and China) all have a long a way to go to catch up with the US, Japan, the UK and Europe. However, their growth rates will be higher since they are playing catch-up and so investment will flow in that direction. In addition, the global economy is adjusting to competitive advantage, which is what open markets and free trade trade lead to. This is good. Capitalism is lifting billions of people out of poverty and bringing them into the contemporary world. As a result of competitive advantage a lot of lower level work will shift to low wage countries, creating dislocations for some time in the developed economies. But overall this is a good thing. The developed countries will begin to take more advantage of superior education, infrastructure, technology, etc, to develop new types of work some suitable for exploiting their advantages, which they have already paid for. Globalization is a messy business, but it is the right thing to do for many reasons.

The big problem in the US right now is twofold and these are linked. First, voodoo economics resulted in stagnant or reduced incomes at the bottom, forcing consumers to rely ever more on credit. Secondly, the credit markets were destroyed by a variety of factors discussed at length here. The result of these factors is reduced demand, which is now affecting the real economy. The banks are insolvent (see Mish) and this has created a liquidity trap, where monetary and fiscal policy don't work to increase lending. Falling credit means a decreasing supply of money, which is deflationary. We are arguably now slipping into deflation.

The underlying principle of voodoo economics is to increase investment to increase supply to pull demand along. That blew up for a number of reasons in addition to the fact that it was voodoo. The Keynesian solution is to increase demand by "helicoptering" funds to the bottom through government spending, ideally through direct transfer, e.g., food stamps, unemployment insurance, etc, and spending on infrastructure, health care, education and other government "investments" in the future that will pay back manyfold. This is not happening yet, and state government are already cutting back due to falling revenues and high cost of borrowing. If it isn't corrected soon, a deflationary spiral will set in, which is difficult to reverse. That's the time to get hysterical, and we are approaching it, judging from the planned cutbacks and lay-offs.

The problem is that the Bush policy was to try to rescue those financial institutions (cronies) that are "too big to fail." This has diverted funds from where they would do the most good most quickly, in order to bail out the elite and keep them wealthy and powerful at public expense.

There were and are other ways to do this, but the powers that be are fleecing the sheeple instead, and the Obama team doesn't seem to be ready to take a radically different course and let the system correct by destroying bad debt and knocking inflated asset values down to earth. As a result the debt overhang and other dislocations not being addressed will constrict the US and other developed economies for some time, and put a crimp in global development also.

This is not an entirely lost cause, however, since the Obama team seems to be planning to dance between saving the elite and restructuring the national and global economy. This could actually be fixed fairly quickly but very painfully, and the elite would take a big hit. The Obama team doesn't seem ready for that. So we will likely muddle through instead and everyone will feel some pain.

The question is in what shape we emerge from this and how long will it take. Will it be on a stronger footing for producing national prosperity, or will more wealth and power become concentrated at the top through consolidation. Right now, it 's not looking good for the Jeffersonians that want decentralization and very good for the Hamiltonians that will push hard for greater and greater centralization. Hamilton_vs_Jefferson_redux

So progressives have their work cut out for them and need to be making loud noises right away. David Sirota is leading a charge, for example.

Salon: Obama sells out to Wall Street: The president-elect's support of the bank bailout is payback to his wealthy Wall Street supporters by David Sirota

Big Money is "entitled' to two trillion of your dollars

So far. And that's just what they are admitting.