Wednesday, April 11, 2007

[lay-economics] higham's theory of misery

Relating what one buys to one's unit wage seems as good a measure as any to me.

After the crisis, a teacher's salary was $60. A base Lada cost $4,000 and a one roomed flat cost $10,000. Now a teacher earns $300, a base Lada costs $6000 and a flat costs $70,000.

The flat, which had cost 167 months salary, now costs 233 months salary.

To make up the shortfall, credit is offered in the form of mortgages and finance. But one can't make a silk purse out of a sow's ear and the result is constant and increasing debt.

While credit was not freely available, one paid out of one's pocket and therefore the unit cost of a house was held down by market forces. Now Russia has joined the debt economy, the nexus has been broken and the time period of debt has increased all the while.

Productivity has less and less to do with the well-being of individuals in a debt economy,. past a certain point. Even with a job, the gap between salary and unit cost of assets is widening to the point that without credit, you have neither a roof nor transport.

If one applies Kelly's theory in a global economy, the effect is even worse.

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