American dream (1): you will earn more than your parents, but will you be richer?

According to our theories of the Kondratieff wave it is important that you will see better times for the middleclass to get prosperity, to get a rising tide of the long wave. Because of the ICT Revolution, especially the Communication revolution with its big networks, you saw a part of the population, individuals (or cosmopolitans) doing very well, not only in the West but especially also in emerging Markets. The world becomes flat (Friedman), but is that causing a richer middleclass in Emerging Markets and a poorer middleclass in the West?


Until now it was one of the axioms of economic theory that high growth in a part of the world is good for growth elsewhere (the rising tide lift all boats). But maybe the middleclass in Europe and US is now not profiting from the rise of China, or profiting much less than the US did from the high growth in Europe after WWII.
Are trends in that direction already visible? The view on that is blurred by the credit crisis. Let us first think about the trend in the last years. In this first article I will concentrate on the US.

In the New York Times were a few articles as a kind of update for the American dream: how do the current children it compared to their parents in income and wealth. ( http://economix.blogs.nytimes.com/2012/07/11/only-half-of-americans-exceed-parents-wealth/ Only Half of Americans Exceed Parents’ Wealth by Catharine Rampell).
Her main conclusion based on the elaborate interviews by PEW Center since 1968 mainly based for parents on the 1984 wealth polls and for the children on three reports after 2000. Everything was corrected for age, in real terms etc. :

1. In almost all households in the US (84%) the children earned more money (in real terms) than their parents did at the same age.
2. About half of the households are now after inflation not richer than their parents were
3. When your parents didn’t earn much, the probability is quite low you will earn a lot (in the highest quintile) and the other way around: when your parents earned a lot the probability you will earn almost nothing (lowest quintile) is low.
4. The re is a lot of income mobility in the quintiles: the probability as a child to get a better income than your parents was considerable.

The Dutch collapse repaired by the Kunduz Coalition

After seven weeks of talking about more fiscal austerity in the Netherlands the right extreme Freedom party PVV couldn’t stand it any more. All those cuttings on care, higher (VAT) taxes made life too difficult for Henk senior, so told Geert wilders, the leader of the PVV, all the crying of his main assistant Fleur Agema had not made the other parties weak. They still listened to the dictates of Brussels, made under pressure of the Dutch, to lower the government deficit below 3% in 2013. So the government fell and it looked like the Dutch were undisciplined non core members of the euro zone.

But surprise, surprise in two days  the three small opposition parties that supported government when they lacked the support of Wilders came with a package that seems to fulfil the wishes of Brussels. The new coalition until the election is called the Kunduz coalition. Kunduz is where the Dutch in Afghanistan try to make good cops of non soldiers. To get that agreed the same three small parties that came with the new package voted for the Kunduz mission (in the eyes of the US this was still  not good enough as effort to keep the Netherlands as the 20^th member of the G20) .

 Labour (PvdA) was not involved in the creation of the compromise package. So there was a lot to blame about their new leader Samson, he had missed a big opportunity to show that labour works. All parties involved told literally many times that it was important to jump over their shadows. Samson didn’t manage it as the cartoon shows (Ruben, from NRC).

The spirit of the age has changed. Now labour obstructs all efforts to reform the economy, they are the conservatives now. In the past it was labour that wanted to reform, to profit from the better times that are ahead and the right parties wanted to protect their good fortune. Now it is labour that no longer sees good times ahead, while individuals still see good times ahead.

At the moment the pessimists have the majority, so for electoral profit is it clever to be against reforms, against Europe and to blame the banks.

While in the US the election is between fairness (and care) of Obama or more freedom/ American dream of Romney in the Netherlands it is between anti Europe/ anti immigration conservatism and individual freedom, environment, reforms on the labour market, mortgages and higher retirement ages to make the system sustainable.

American dream in danger: young people no longer enthusiastic about driving a car

We live in strange times. I blogged already about Japanese youngsters no longer interested in sex, in credit worthy developing countries that have to subsidise not credit worthy developed countries and now we are shocked by American youth no longer wanting to drive a car (in Japan that is even more extreme).


Per capita peolpe drive now in the US as much as in 1995. The US is no longer itself since the credit crisis. The main culprit are the people below 35 that drive much less.

The car, the symbol of independency, is no longer a must for a bigger and bigger part of the US youth. They prefer to sit behind a computer, chatting on Facebook etc, they borrow the car of daddy sometimes and say they want to protect the environment. Gas gurglers are out, less gas consuming cars are in.

A growing part of the youth is too lazy to get a drivers licence, they are scared by lower subsidies/ less possibilities to learn driving at schools. In ten year time the number people below 30 (and above 15) without a drivers licence from 21% to 26%. This is not only because of the high unemployment of the below 30’s. Even bonus getting too much earning youth loathes cars nowadays. Partly that is because of the high gas prices.

The car manufacturers try to get those environment in love again with cars by offering electrical cars with spottify and social media installed.

Sources: FT Young Americans turn away from driving: http://www.ft.com/cms/s/0/78420798-895c-11e1-bed0-00144feab49a.html#ixzz1sZ0s92qB

chart:

http://www.businessinsider.com/vehicle-miles-driven-february-2012-4#ixzz1ssG9QngW

Ever lower income growth for lower middle class, others see more income growth

Since about a year the wage growth in the US is calculated for all labourers together, for the ordinary employees (lower middleclass) and their bosses, supervisors etc. (upper middleclass)
The average of those two groups shows a stable rise of wages. The old wage numbers took only the lower middle class wages into account and by doing so it was hard to explain why consumption growth was doing so well.

The chart of Benderly shows that the wage of the lower middle class is rising less and less. That trend is inexorably down, even while the recession has ended three years ago.

For the upper middleclass the bad times are over. They get salary rises (in the US). Around the credit crisis those wages were going down, but now it is Goldilocks for them. This means bigger income inequality is continuing.

Linsanity: the rescue of the American dream

He is a lin-sation, he unleashes a lin-demonium, girls sent him last week va-lin-tines. Words are in shortage how to tell how magnificent he is and so a new lin-language has originated, with corruption of words by pasting lin in it.
All that sensation is caused by Jeremy Lin, who is since a few weeks playing better than almost anyone ever before for the Knicks in the NBA, basketball.
Before that time he was the loser, that was transferred like a cast-off from one club to another. But a few weks ago the Knicks had so many injured players they had to give him a place in the team.
The prejudices prevented anyone giving a dime for what he could do for the team. He is too small (just 1.90 meter, not enough for a basketball player at the highest levels), a Chinese American from Taiwan. And the Chinese tiger mothers don’t want that their children spoil their time with sport. Americans from Chinese descent never performed in sports. So he had to go to Harvard. He is not black, too clever and worst of all: he is very religious. And that religiosity learns to be humble instead of trashing your adversaries and it prevents all your testosterone to transform in a winners mentality.
So all in all a very unlikely sport hero, that won unbelievable amounts of points for his club. The share price of the Knicks went up by 10% last week because of lin-sanity.

That extraordinary, unlikely fact that Jeremy Lin is a fantastic basketball player has created an unbelievable enthusiasm: linsanity is already a registered trademark. Almost never somebody became so instantly a celebrity, even Susan Boyle bites into the dust in this respect.
There is even a global linpact: American basketball is getting popular in China.

By the way, Lin was already discovered as an above average player in the Harvard team. He was contracted in 2011-2012 for $ 762,000 and that is a salary you don’t get when you don’t know where the basket is, as suggested in the press was the case only a few weeks ago.

There is some fear because of the decline of the fortunes of the middleclass that no one still believed in the American Dream, it seemed to be deleveraged into a new normal where you accept that you never will fulfill your dreams, even when you work very hard. Linsanity proves the American Dream is still alive and kicking.

Obama's State of the Union: Justice is important,not justice

The State of the Union is very important to see the spirit of the age. Under the reign of Bush freedom was all important. He used the words freedom and liberty in one year more than 40 times. Under the reign of Obama it is all about justice, fairness.
That is important: when the emphasis is on freedom markets are more inclined to be risk-on, when the emphasis is on care and justice (only when the institutions are already OK) this usually is bad for inflation and risk-on. In our book we distinguished three domains of the spirit of the age (according to how van Staveren and McCluskey did): freedom, care en justice. In some times the emphasis is on freedom, in others on care and/or justice.

The republicans say freedom is by far the most important: freedom, freedom of speech, the possibility to make lots of profits, the right to defend your belongings with guns and as less as possible government intervention.

The democrats go more for justice (it is not fair that the secretary of Warren Buffett pays a higher tax % of her income than her boss; something that is partially set right by making her a special guest at the State of the Union ceremony) and care (Obama-care where everybody can get medicare, but also a better environment/ cleaner energy etc; this was mentioned in the State of the Union, but not prominently).

There were no shocking plans proclaimed that could move the markets. Obama did drop a hint that he will come in a few days with a grand plan for mortgages, how to get easier refinancing at the current low mortgage rates. ("I'm sending this Congress a plan that gives every responsible homeowner the chance to save about $3,000 a year on their mortgage, by refinancing at historically low rates. No more red tape. No more runaround from the banks. A small fee on the largest financial institutions will ensure that it won't add to the deficit and will give those banks that were rescued by taxpayers a chance to repay a deficit of trust”. )

The proposal to impose a Buffett- tax on the rich so that they pay at least 30% taxes is not feasible in the congress and widely seens as election propaganda.

The republicans of course were disgraced about all the talk of Obama about justice: Daniels (GOP) said: "We do not accept that ours will ever be a nation of haves and have nots; we must always be a nation of haves and soon to haves."

(cartoon from conservativebyte.com)

The American Dream Is Alife, also in India

This story is sent to me by a collaegue form the English The Independent, but you see it at many places, also in India (they also dream about this). The comment was he had chosen the wrong profession, even while he was nerdish enough.

Independent: Talent tug of war makes Silicon a happy valley
2010-11-13 05:22:06.107 GMT

By Guy Adams

As web giants fight over executive geeks, bonuses are booming. Guy Adams reports

CHRISTMAS CAME early this year at Mountain View, the sunny "campus" near Palo Alto, California, that is Google's global headquarters. On Wednesday, the firm's CEO, Eric Schmidt, emailed all of his 23,300 employees with a piece of happy news: they'd each be getting a 10 per cent pay rise in the New Year, along with a seasonal bonus of $1,000 (617).

"We believe we have the best employees in the world. Period. The brightest, most capable group of this size ever assembled," he declared. "It's why I'm excited to come to work every day - and I'm sure you feel the same way. We want to make sure that you feel rewarded for your hard work."

If Heineken made bosses, they'd probably come in the shape of Schmidt, a captain of industry who knows exactly what makes his workforce tick.
That sort of cash will, after all, buy an awful lot of trendy T-shirts and Apple gadgets for the bright young things at the heart of every Silicon Valley success story.

It will not change lives, however. And therein lies the problem with Schmidt's extravagant gesture. As a sop to stem a trickle of talent which has been leaving the firm that Does No Evil for smaller rivals such as Facebook and Twitter, or edgy new start-ups, it looked like a sign of weakness.

In America's tech capital, cold hard cash isn't usually thrown around by companies wanting to keep top staff. Instead, they tout free meals and yoga lessons. If money must be a carrot, then it usually comes via stock options.

Lately though, Silicon Valley has become the setting for an arms race every bit as vulgar as that fought among the pin-striped elite of Wall Street. A flood of new start-ups, combined with the expansion of bigger firms has sparked a war for talented employees. And with demand trumping supply, Google is increasingly seen as part of the dusty establishment.

"The market is frothing and new companies are being created faster than the people who can develop them," says Paul Daversa, whose eponymous firm is one of the tech industry's top headhunting outfits.
"It's a firestorm out there, and talented people looking for creativity and innovation and technical advancement seem to believe that instead of Google, they must go to a cool start-up. It's a problem for them."

Despite the grim wider US economy, job listings in Silicon Valley are up 69 per cent from last year. Seed funding has increased by a factor of ten, reflecting the fact that - in contrast to the tech- bubble of the late 1990s - most internet firms have now worked out how to extract revenue from the medium.

You can see the results of this boom in Palo Alto's buoyant property market. Twitter just signed a lease for 200,000 square feet of new office space. Zynga, the social gaming giant, just added 270,000 more.
Google is recruiting 200 new employees each month. Facebook hopes to double its 2,000-strong payroll by 2013.

The hot commodity is software engineers. Tales of excess abound.
Graduates with a decent computer science degree from MiT or Berkeley, the Oxbridge of US engineering schools, can expect to earn $120,000 in their first year after graduation.

After that, the sky's the limit. Techcrunch, the Silicon Valley news site, this week reported that a staff engineer at Google was given $3.5m in company shares to ignore an overture from Facebook's HR department. One of his more junior colleagues, on a salary of $150,000, was offered a 15 percent rise and a $500,000 bonus to remain... but still decided to jump ship.

The incidents come during a wider landgrab by Facebook, which is aggressively courting Google's top talent. At least200 of Mark Zuckerberg's employees came from the search engine, including Bret Taylor, who is now his CTO and Lars Rasmussen, co-founder of Google Maps who rubbed salt into the wound of his departure by telling
reporters: "The energy [at Facebook] is just amazing, whereas it can be very challenging to be working in a company the size of Google."

Matthew Papakipos, the engineer in charge of Google Chrome, joined Facebook in the summer, along with Android boss Erick Tseng, and sales chief David Fischer. In an audacious move, Facebook even managed to poach Josef Desimone, its rival firm's executive chef. Mark Zuckerberg was persuaded to pursue him after falling in love with his hot dogs.

Just one poor soul is not sharing in this gold rush. He, or she, is the unfortunate staffer who leaked Eric Schmidt's memo this week to Business Insider and Fortune magazine. A day later, Google announced, curtly, that the employee in question had been terminated. These may be happy days in Silicon Valley, but they don't want to rub our faces in it.

[US Outlook, Business, page 55]

BRET TAYLOR

The co-creator of Google Maps left to start his own company - which Facebook bought for $50m

JOSEF DESIMONE

Facebook even poached Google's top chef - Zuckerberg can't get enough of his hot dogs

ERICK TSENG

Google's top mobile apps developer moved to take over Facebook's smartphone operation

LARS RASMUSSEN

Facebook founder Mark Zuckerberg hired the engineer after Google dumped Wave, his pet project

MATTHEW PAPAKIPOS

The mastermind behind Google Chrome was tempted away by Facebook earlier this year

Mad Men and Bad Girls

By MAUREEN DOWD
Published: July 31, 2010
http://www.nytimes.com/2010/08/01/opinion/01dowd.html?_r=1&hp
Back in the early ’60s, Holly was the woman we wanted to be. The slender and stylish New York beauty was supported by men, yet she seemed free.

Now, back in the early ’60s on TV, Betty is the woman we don’t want to be. The slender and stylish New York beauty is supported by men, and she seems trapped.

“Breakfast at Tiffany’s” was cool because of its modern glamour, ushering in a sexy future. “Mad Men” is cool because of its retro glamour, recalling a sexy past.

Audrey Hepburn’s Holly Golightly, a call girl with a crazy streak, got money from strange men at boîtes for “trips to the powder room.” January Jones’s Betty Draper, a housewife with a crazy streak, cheated on her husband, when she was pregnant, with a strange man at a boîte.

The tightly wound Betty is a gilded bird in a cage; she needs to belong to someone, this season to a new, older husband, an adviser to Governor Rockefeller.

The wild-child Holly is terrified someone will put her in a cage — in the Truman Capote novella, she won’t even walk past the Central Park Zoo — and she doesn’t want to belong to anyone. (She also doesn’t want anything to belong to her; that’s why she dumps her cat in a garbage can at the end. In the tacked-on happy ending of the movie, she finds the cat; in the book, which has no leading man to tell her she’s already in a cage of her own making, she doesn’t.)

The alcohol-swigging Betty never calls her blue periods “the mean reds,” as the alcohol-swigging Holly did, but the women have their vertiginous moods in common: luminescent looks overlaying dark psyches.

In Georgetown, in the window of a vintage store called Annie Creamcheese, there’s an iconic poster of Audrey Hepburn as Holly, sleek with cigarette holder, long black Givenchy dress and pearls. Right around the corner, in the window of Banana Republic, there’s a huge picture of Jon Hamm, looking sleek with Don Draper’s mysterious, matinee-idol smolder.

Even though many of us grew up not realizing it, Holly’s a hooker. And in the new season of AMC’s “Mad Men,” which started last Sunday, Don hires a hooker and wants to be slapped.

Set in the same era, the two Manhattan fantasies are dashing escapes from the prim, airless Eisenhower era. Both feature magnetic characters, smoke rings and, in Capote’s phrase, “martini laughter.”

Their gorgeous visual style cloaks strangled emotions, and both narratives brim with louche trysts, sexual liberation, bohemian flashes, suppressed demons and reinvented lives.

In “Mad Men,” the single Richard Whitman from Pennsylvania coal country morphs into the married Don Draper after an accident in the Korean War. In “Breakfast at Tiffany’s,” the married Lulamae Barnes morphs into the single Holly Golightly to get out of the backwater Tulip, Tex.

“In New York you can become anything,” Sam Wasson, who wrote the new book “Fifth Avenue, 5 a.m.: Audrey Hepburn, Breakfast at Tiffany’s and the Dawn of the Modern Woman,” told Vanity Fair.

Wasson asserts that Holly was the precursor of Carrie and the “Sex and the City” singletons (not to mention TV trailblazers Mary Tyler Moore and Ally McBeal.) Truman Capote had wanted Marilyn Monroe for the role of the teenage hillbilly turned chic prostitute, and it would have been fun to see that version, too.

But when the producers chose the less exhausting Audrey, her real-life good-girl persona helped mask the raciness of her character.

In the 1960 movie of John O’Hara’s “Butterfield 8,” Elizabeth Taylor’s call girl had to die in a car crash for her sins, just as 20 years earlier, Vivien Leigh, playing a ballerina-turned-prostitute in “Waterloo Bridge,” had to be punished for her wicked ways with a final leap off the bridge.

It would be many years before audiences would embrace overt hookers as heroines: Jamie Lee Curtis in “Trading Places” in 1983, Julia Roberts in “Pretty Woman” in 1990 and Kim Basinger in “L.A. Confidential” in 1997.
Married to the oppressive Mel Ferrer and with a new baby boy, Hepburn’s princess-swan image bled into Holly, making her seem less like a member of the oldest profession and more like a modern, fun-loving single girl.

“In ‘Breakfast at Tiffany’s,’ all of a sudden — because it was Audrey who was doing it — living alone, going out, looking fabulous and getting a little drunk didn’t look so bad anymore,” Wasson writes. “Being single actually seemed shame-free. It seemed fun.” So, as a haute hooker, Audrey Hepburn was a fairy godmother, not only to feminism but to the prevailing ethos that style and cool trump all.