
After the Fall: Ten Years After the Crash - dbcooper
https://www.lrb.co.uk/v40/n13/john-lanchester/after-the-fall
======
fineline
Interesting to see an article that recognises the role QE has played in
driving inequality and disrupting political landscapes, but I wonder why Mr
Lanchester doesn't consider the alternative policies that could have been
enacted. i.e. if governments had focussed on spending money into the real
economy instead, through infrastructure spending and real nation building
projects - creating jobs, real (not paper) wealth and the platform for further
economic growth - rather than spending funny money into existence supporting
markets that blow up prices without any real addition of value.

~~~
JumpCrisscross
> _if governments had focussed on spending money into the real economy
> instead, through infrastructure spending and real nation building projects_

The Federal Reserve is an independent agency. It repeatedly implored Congress
to increase fiscal spending. That didn’t happen, so monetary policy had to
attempt to compensate.

> _creating jobs_

At least in America, we did a good job of this. Ben Bernanke navigated us away
from an alternate history in which the GFC was a second Great Depression. In
New York, the Hudson Yards are coming up as one of the biggest public works
project since the Great Depression. Things could have been better, but they
could easily have been a lot, lot worse without QE.

~~~
weirdstuff
We've done a pretty bad job at bringing back jobs. Labor force participation
rate has fallen, while people are retiring later. Retirement/aging doesn't
even help explain the drop. Especially since the younger generation has more
than replaced the older one, and the older one isn't retiring at the same
historic rate.

We're not in great shape, employment wise.

[https://data.bls.gov/timeseries/LNS11300000](https://data.bls.gov/timeseries/LNS11300000)

~~~
JumpCrisscross
> _We 're not in great shape, employment wise_

Almost everyone who wants a job has one. And real wages have been rising for a
decade. That’s pretty good shape.

Labour force participation is a complicated question deeply intertwined with
the opioid crisis, increased rates of college attendance, the mis-use of
federal disability insurance and other factors. Quoting labour participation
without reference to demographic shifts creating more retirees, moreover,
mischaracterises the statistic. Demographically, there is no world in which
2018 LFP would have been higher than 2008.

~~~
germinalphrase
Does your analysis account for quality of jobs available? I know a lot of
overeducated/underemployed 30-40 year olds here in the Midwest.

~~~
JumpCrisscross
> _Does your analysis account for quality of jobs available?_

I was responding to a claim that the government should have focussed on
"creating jobs". In that context, the employment-unemployment line seemed most
significant.

Real wages have been rising for a decade, so the central tendency for employed
persons is better than it used to be (or than it was pre-crisis). There is
still unemployment, particularly among the undereducated [1]. But from an
average worker's perspective, it's one of the best economies we've seen in
years.

[1]
[https://www.bls.gov/cps/cpsaat07.pdf](https://www.bls.gov/cps/cpsaat07.pdf)

~~~
vkou
Have wages - cost of the same housing - cost of the same healthcare been
rising?

From the worker's perspective, what you get paid is only half the story.

------
nimbius
hindsight is 20/20, but does anyone recall some of the ludicrous things we
actually did to prop up some of our structurally too-big-to-fail institutions?

as an automotive mechanic the one institution during this crisis that stuck
out in my mind was "cash for clunkers." Essentially the government subsidized
ordinary americans to trade in whatever car they had so long as it got
relatively poor gas mileage and wasnt more than 25 years old. This was a 3
billion dollar program designed largely to get anericans to start spending
money on cars --any car-- by bribing them to destroy their own car.

Two studies basically declared the program a failure.
[https://en.wikipedia.org/wiki/Car_Allowance_Rebate_System](https://en.wikipedia.org/wiki/Car_Allowance_Rebate_System)

But I have still a deep sense of chagrin when I remember mixing sandy batches
of "engine disablement compound" and pouring them directly into a perfectly
good truck or minivan. Sure, it might not win an award for climate change but
these cheap cars and trucks could have gotten a single mother to and from the
grocery store or school once or twice a week as needed. We intentionally
destroyed them all. For those thinking the process was sane and simple, it
wasnt. Doing this is loud, dirty, and throws a cloud of smoke you can see for
a mile or more.

[https://www.youtube.com/watch?v=M2Sz5vtfanw](https://www.youtube.com/watch?v=M2Sz5vtfanw)

We were even so desperate to fix the economy that the government basically
started cutting people checks. The idea being they would spend the money on a
shopping trip to the mall or something...
[https://en.wikipedia.org/wiki/Economic_Stimulus_Act_of_2008](https://en.wikipedia.org/wiki/Economic_Stimulus_Act_of_2008)

I spent my check on groceries when I got it, and put the rest into savings.

~~~
lkrubner
" _I spent my check on groceries when I got it, and put the rest into
savings._ "

That is entirely appropriate. When the economy is depressed, we want people to
both spend more and pay off any debts they might have, so your mix of spending
and savings is just what the economy needed. The boost to consumption helps
the economy get going again. And to the extent that people are paying off
debts, their debts are moved on to the ledger of the government. Since the
government pays a lower interest rate than private citizens, this reduces the
overall burdens on the economy, and, again, helps the economy get going again.
Both aspects of this help.

~~~
rubicon33
I think the point he is making is that he didn't "spend more".

He bought groceries, which he would have done any other week. If your economic
stimulus bill is intended to help people buy groceries, then you ought to
appropriately name it a economic relief bill.

------
olivermarks
"...According to calculations that Zucman himself says are conservative, the
missing money amounts to $8.7 trillion, a significant fraction of all
planetary wealth. It is as if, when it comes to the question of paying their
taxes, the rich have seceded from the rest of humanity." A sobering
reality...especially when you consider the ultra rich design and run the
political systems that define the tax bases and laws the rest of the world are
organized under...

~~~
hippich
[http://www.pewresearch.org/fact-tank/2017/10/06/a-closer-
loo...](http://www.pewresearch.org/fact-tank/2017/10/06/a-closer-look-at-who-
does-and-doesnt-pay-u-s-income-tax/)

"A Pew Research Center analysis of IRS data from 2015, the most recent
available, shows that taxpayers with incomes of $200,000 or more paid well
over half (58.8%) of federal income taxes, though they accounted for only 4.5%
of all returns filed (6.8% of all taxable returns)."

~~~
olivermarks
That report is parochial research of onshore tax payers who are in the US
system. The vast majority of the elites wealth is parked offshore

~~~
padobson
I agree with this. Folks earning $200k-$500k are paying most of the taxes
because they have little-to-no political influence, and they're easy
scapegoats because most people make less than them. This is the glass ceiling
of the US tax code.

~~~
hippich
[https://www.dailysignal.com/2017/10/18/rich-pay-fair-
share-n...](https://www.dailysignal.com/2017/10/18/rich-pay-fair-share-
numbers/)

"The top 1 percent of income earners, those having an adjusted annual gross
income of $480,930 or higher, pay about 39 percent of federal income taxes.
That means about 892,000 Americans are stuck with paying 39 percent of all
federal taxes."

Another source about who is not paying any taxes, and who receives money from
government - [https://nypost.com/2016/02/24/45-percent-of-americans-pay-
no...](https://nypost.com/2016/02/24/45-percent-of-americans-pay-no-federal-
income-tax/)

How much exactly should be top 1% be paying to no longer be blamed for not
paying taxes?

~~~
hawkal
This is a naive perspective, but, imagine someone has 10 million dollars
banked, and earns 175,000 a year in dividends. S/he pay 26-35k in taxes
(15-20%, cause I don't know tax code). Now, a couple has a combined income of
175,000 a year. They pay 40k in combined federal + FICA (used an income tax
calculator). I think that 5-14k discrepancy is where the blame for "not paying
taxes" comes from.

~~~
rsync
"... imagine someone has 10 million dollars banked, and earns 175,000 a year
in dividends. S/he pay 26-35k in taxes ..."

I am imagining this and I immediately also imagine that quite a lot of income
and/or capital gains taxes were paid during the accumulation phase of that
$10M.

I suppose she could have inherited $10M tax free[1] but whoever bequeathed it
to her then paid the taxes on it during the earning/accumulation phase.

My point is, comparing the present day taxes on dividends on a nest egg to the
_income taxes_ someone else is paying is not a very useful comparison. _All
else being equal_ it should not be interesting or provocative to see the
income taxes exceed the nest egg taxes in an example like yours.

[1] Estate tax exemption in 2018 is $11M
[http://www.wealthmanagement.com/estate-
planning/2018-estate-...](http://www.wealthmanagement.com/estate-
planning/2018-estate-gift-and-gst-tax-exemption-officially-published)

~~~
JediWing
Dividends are income. It's farcical that they are not treated as such in the
US tax code.

I believe the point is that in the example above, someone living off their
nest egg, able to do nothing, are paying less in taxes than someone still in
the workforce, earning.

This exacerbates the concerns over wealth inequality because those who have
built wealth, can then grow their wealth at a lower tax rate than those stuck
at the bottom of the income ladder.

~~~
hippich
dividends are treated almost the same way. at least from tax rate point. now -
you can offset dividends by other losses, but you can do similarly if you have
just W2 income and run side business losing money (with few caveats)

EDIT: Thanks JediWing - I have no clue why I thought dividends are taxed at
the same level. Thank you correcting me.

~~~
JediWing
Dividends are a flat 15% for earners under ~425k income, and a flat 20% for
those over.

This means that a stock grant with a generous dividend is a loophole for high
earners...in addition to simply adding complexity and magic thresholds to the
tax code. It seems to me to be just bad policy.

------
amriksohata
We use the words after the fall, but some EU countries like spain, Italy and
Greece are still on the brink with massive youth unemployment

~~~
at-fates-hands
It doesn't help there massive amounts of refugees flooding into those
countries as well. I realize people are fleeing war and violence, but they're
going to countries where there isn't any jobs, and the economic situation is
dire.

It's the worst possible scenario. They're leaving their home countries with
nothing and arriving with an even bleaker future ahead of them.

~~~
icebraining
There aren't, though. Immigration has dropped a lot in 2016, and again in
2017. Mediterranean crosses more than halved from 2016 to 2017. Last year, the
EU only granted protection to 540k persons, in an EU with over 500M
inhabitants.

~~~
at-fates-hands
Not according to the articles I've been reading:

25.03.2018:

[https://www.dw.com/en/on-the-edge-of-the-eu-refugee-flows-
fl...](https://www.dw.com/en/on-the-edge-of-the-eu-refugee-flows-flood-the-
evros-river/a-43068842)

 _It 's not clear how many make it across. But last year alone, officials from
Frontex, the EU's border agency, said they intercepted 5,500 illegal
crossings, a whopping 80 percent rise compared to the previous year._

 _During that same period, Turkish authorities told the United Nations they
had intercepted nearly 21,000 people, more than triple the number reported the
previous year._

29.9.2017:

[https://www.theguardian.com/world/2017/sep/29/surge-in-
migra...](https://www.theguardian.com/world/2017/sep/29/surge-in-migration-to-
greece-fuels-misery-in-refugee-camps)

 _The number of people arriving, across land and sea borders, has more than
doubled since the beginning of the summer. Authorities estimate arrivals are
now at their highest level since March 2016, with over 200 men, women and
children being registered every day._

 _“We’re living the days of 2015,” said Pantelis Dimitriou from Iliaktida, a
local NGO on Lesbos operating accommodation and support centres for the newly
arrived. “The flows have become huge. From around 50 to 60 in early July they
are now at more than 200 every day._

2.7.2017:

[https://gulfnews.com/news/europe/italy/italy-overwhelmed-
by-...](https://gulfnews.com/news/europe/italy/italy-overwhelmed-by-flood-of-
immigrants-1.2051986)

 _But it is also a reflection of Italy’s years on the migration front lines
with little help from the rest of Europe. More than 82,000 people have arrived
in Italy this year, a 20 per cent increase over the same period last year,
according to the United Nations refugee agency._

 _Under current EU rules, asylum seekers are supposed to apply for protection
in the first EU country that they enter. At the height of the refugee crisis
in late 2015, EU leaders set up a quota system to try to distribute some of
the refugees from the main arrival nations of Greece and Italy, but it has
barely gotten off the ground._

 _The influx has strained Italian infrastructure — and the goodwill of Italian
voters._

~~~
icebraining
You're seeing peaks and overestimating. For example, in the first report
Frontex talked about a 80% increase, but that was just about those 3 months.
Look at their full year report:

 _" Frontex reported on Tuesday that the number of people illegally crossing
into the European Union had fallen by 60 percent in 2017 compared to the
previous year. "_

[http://www.infomigrants.net/en/post/7683/eu-agency-
frontex-r...](http://www.infomigrants.net/en/post/7683/eu-agency-frontex-
reports-drop-in-illegal-border-crossings)

That second link is also about a short period where they were seeing a lot of
people per day, but that has nothing to do with the total numbers on a year
basis.

Yes, the start of 2017 was high, yet the total was much lower.

------
crwalker
The ten-year anniversary is a good moment to look at the Case-Schiller index
today and compare it to the peak of the bubble in 2006.

[https://fred.stlouisfed.org/series/CSUSHPINSA](https://fred.stlouisfed.org/series/CSUSHPINSA)

I think there will be some _great_ deals in real estate by 2021.

~~~
jeffreyrogers
Maybe, but it's hard to predict. I don't think real estate prices are going to
crash unless mortgage delinquency rates go up dramatically, which hasn't
started yet:
[https://fred.stlouisfed.org/series/DRSFRMACBS](https://fred.stlouisfed.org/series/DRSFRMACBS)

At least not nationally, maybe in some metro areas it has. Mortgage lending
standards have started to loosen though, but I think it'd take a while for
that to have a substantial effect. Housing prices tend to increase because
good land is scarce in most places people want to live.

~~~
germinalphrase
My wife and I have been looking to purchase a house, and it’s amazing how many
people tell us “it’s a terrible time to buy. Don’t do it”.

That’s fine advice, as far as it goes, but what would we be wait for - another
crash? This chart does suggest that prices are inflated, but what do I do with
that information? Wait for a downturn in two years? Ten?

~~~
derekp7
The best advice I can give you is to not buy more house than you need (too
expensive will run the risk of negative equity). But also make sure what you
get will meet your needs for at least a decade or so. And watch out for
potentially high property taxes.

One guy I worked with had an issue where his family outgrew the house he
bought, but he couldn't get enough out of it for a down payment on a bigger
place (even though the bigger house was cheaper than what he bought his small
2-bedroom for). So you don't want to get into this situation either.

Another situation that just happened to someone else I work with, she bought a
house that she thought was reasonable. However her property taxes took a bit
of a jump (the previous owner had lower taxes due to some senior discount).
And it will be a few more years before she gets enough equity in it that can
be used towards another house.

------
baybal2
This writing is brilliant.

A follow up: [https://www.theatlantic.com/magazine/archive/2018/06/the-
bir...](https://www.theatlantic.com/magazine/archive/2018/06/the-birth-of-a-
new-american-aristocracy/559130/)

And another one: [https://www.dawn.com/news/1417420/a-new-upper-
class](https://www.dawn.com/news/1417420/a-new-upper-class)

~~~
ycombinete
The LRB always _always_ has great writing. I've subscribed for 2 years now,
and have never regretted it at all.

~~~
andy_ppp
If you guys like this I highly recommend the University of Cambridge politics
department analysis of current affairs.

[https://www.talkingpoliticspodcast.com/](https://www.talkingpoliticspodcast.com/)

------
fullshark
“What if the governments of the developed world turned to their electorates
and explicitly said this was the deal? The pitch might go something like this:
we’re living in a competitive global system, there are billions of desperately
poor people in the world, and in order for their standards of living to
improve, ours will have to decline in relative terms.”

This is a guaranteed losing platform

~~~
dbatten
It's also preposterous. Wealth isn't a zero-sum game. Compared to our
ancestors in, say, 1000 BC, the vast majority of humanity is far, far,
wealthier while the few who are arguably no better off are not worse off
either. That's all wealth we've created.

We can talk about whether it's a good or moral idea to transfer wealth, but
let's not pretend like that's the only way to deal with poverty.

~~~
ionised
> Wealth isn't a zero-sum game

I keep seeing people say this but is there not a finite amount of wealth in
the world at any given time?

There are also the finite land and natural resources required for wealth
creation.

~~~
fullshark
There's also human ingenuity, technology, and gov't stability which are
multipliers on those finite land/natural resources. Skyscrapers increase real
estate/land for example, courts protect property rights enabling one to invest
capital in venture X.

------
tonyedgecombe
Watching what happened in the UK it appeared we were making a lot of poor
decisions on the hoof. In particular pushing Lloyds into buying HBOS didn't
work out so well.

I often wonder what would have happened if we hadn't bailed out the banks.

~~~
arethuza
Well, the UK government seemed to genuinely believe that had they not bailed
them out that we might have been in a pretty bad situation: looting, troops on
the streets etc.

[https://www.bbc.co.uk/news/uk-
politics-24184728](https://www.bbc.co.uk/news/uk-politics-24184728)

However, with the benefit of some hindsight - I do wonder if these stories
were just a _bit_ exaggerated for political reasons.

Also, if the implosion of the payment system is an existential threat to a
country then why haven't done anything to ensure that this couldn't happen
again? Yanis Varoufakis mentions in one of his books that he proposed a
alternate government controlled payment system that could be used if Greek
banks stopped functioning - why don't we have something like that prepared to
fall back on in a future crisis?

~~~
grey-area
They have in the UK at least - UK Banks have been forced to ringfence core
retail banking, so that other arms could be allowed to fail, but customer
banking be unaffected:

[https://www.gov.uk/government/publications/ring-fencing-
info...](https://www.gov.uk/government/publications/ring-fencing-
information/ring-fencing-information)

Similar to Glass Steagall from 1933 in the US, which was watered down over
decades and eventually repealed when we reached the end of history in 1999:

[https://en.m.wikipedia.org/wiki/Glass–Steagall_legislation](https://en.m.wikipedia.org/wiki/Glass–Steagall_legislation)

Unfortunately it appears history is probably going to repeat in more ways than
just cycles of crisis and financial regulation. I expect trade war and then
global war in the next decade - we’ve reached around 1935 by my estimation.

~~~
arethuza
Thanks - I'd never heard of that - pretty surprised that a Conservative
government implemented anything like that. having said that, maybe that's why
it has been kept relatively quiet?

~~~
mrguyorama
There was a time when the "conservative" party was genuine, reasonable, and
attempted compromise.

~~~
arethuza
In the 1970s or before?

------
exelius
Very interesting article! I agree and have felt the tremors the author
mentions throughout my own work in a related field.

The last decade has taught me that corporations matter more than nations, at
this point. In the case of corporate capitalism, governments act like special
interest groups protecting the corporations that fund their lifestyles.

To that end, if a major bank like RBS were to go belly up and now be beyond
the ability of the U.K. to save, what are the chances we see a “national
merger” where a country offers to absorb the losses in the banking system in
exchange for absorbing the entire nation (population, economy and all)?

This sounds extreme, but it’s effectively what happened in the feudal era.
Wealthy nobles would support whichever king had the resources to protect them.
Only thing I’m doing is replacing “wealthy nobles” with “corporations” — which
are essentially “jointly owned” among the entire “nobility” (I.e. the capital
class in the West).

Ultimately I think we will avoid World War III because the corporations don’t
want it; and they control enough of the global logistics supply chain to
prevent it. So a peaceful way to transition failed governments and financial
systems back to prosperity will be needed if we want to avoid a repeat of the
Weimar Republic.

~~~
cubano
_Ultimately I think we will avoid World War III because the corporations don’t
want it;_

..today, it should have ended with.

Tomorrow, as they say, is a whole new ball game and it's certainly hard to
predict what our sociopathic corporate masters will want for us then.

I agree with your premise, however. Killing your customers is usually
considered "bad business" and is to be avoided most times.

However, given certain political and economic conditions, I do believe
corporations could easily be convinced to give the go ahead to War.

------
sf01
Here's a discussion with the author, if anyone's interested:

[https://www.youtube.com/watch?v=-HFIa_szx_U](https://www.youtube.com/watch?v=-HFIa_szx_U)

------
mcguire
" _A crackdown on international evasion is difficult because it requires
international co-ordination, but common sense tells us this would be by no
means impossible. Effective legal instruments to prevent offshore tax evasion
are incredibly simple and could be enacted overnight, as the United States has
just shown with its crackdown on oligarchs linked to Putin’s regime. All you
have to do is make it illegal for banks to enact transactions with territories
that don’t comply with rules on tax transparency._ "

Like Switzerland?

------
mcguire
" _From a sociological point of view, the crisis exacerbated faultlines
running through contemporary societies, faultlines of city and country, old
and young, cosmopolitan and nationalist, insider and outsider. As a direct
result we have seen a sharp rise in populism across the developed world and a
marked collapse in support for established parties, in particular those of the
centre-left._ "

Weirdly, the "winners"[1] of the populism have been rural, older, nationalist,
and very much insider[2]. Think of both Trump and Brexit supporters. I'm not
entirely sure, but these don't seem to have been the people hurt the most by
the economic crash. The whole situation has an incredibly strong disconnect
between what's actually going on and the facade or veneer of what they think
about it. Ideology trumps reality?

[1] I'm using "winner" because I can't think of anything better, but the
"victory" is Pyrrhic. Not only are they shooting themselves in the foot, even
if they weren't they would not have a good end game.

[2] Yes, the rhetoric is about outsiders, clearing the swamp and that sort of
thing. But those are the most inside outsiders I've ever seen.

~~~
speeder
A really bizarre data that I saw during US elections, was that during pooling
(before actual elections) the map of Trump voters, was almost identical to the
map of places with high death rates.

Also largest trump voter demographic, as the media currently keep harping all
the time as "racist whites males", is the only demographic in US with rising
death rates.

I don't know why certain US demographics started since 2008 to die at such
speed, suicides for example rising unusually fast, and "gun crime" when you
actually split homocides and suicides, also show ludicrous numbers of suicides
(while gun homicides are less than with other weaponry, like knives and bats).

So whatever happened, it affected a certain demographic epically bad...

And when someone propose to be a saviour, no matter how much you hate that
person, you will vote for it... When people have literally nothing to lose and
next "step" in their life, is death, anything else is better.

EDIT: tried to find original source, failed, but found this article instead...
still make the same point: [http://www.businessinsider.com/maps-counties-
where-opioid-de...](http://www.businessinsider.com/maps-counties-where-opioid-
deaths-are-high-trump-2016-crisis-2017-10)

------
emodendroket
I read this piece last week and I liked it a lot. Anyone read his book?

------
NVRM
[https://www.tradingview.com/chart/BTCUSD/YyPhfM9s-Revised-
Bi...](https://www.tradingview.com/chart/BTCUSD/YyPhfM9s-Revised-Bitcoin-
Stance-Overall-Bitcoin-s-last-gasp-for-air-12K/)

