Tuesday, January 09, 2007

Dialogue with Dr. Jagdish Bhagwati

Today at the FT website, you will be able to dialogue with Dr. Bhagwati on the subject of globalisation and wages. The address is

Friday, January 05, 2007

Jagdish Bhagwati's comments on technology and wages

This week the FT ran an editorial by Columbia University's Jagdish Bhagwati. The title was "Technology, not globalisation, is driving wages down." We couldn' t agree more. The comments echo those of C. Fred Bergsten who recently said, "if you are against globalisation, you are against poor people." Bhagwati's point is that technology, not globalisation is responsible for the downward pressure on the wages of the unskilled, and skilled manufacturing worker. This is very very painful, but history shows that it has always been the case. Workers in today's world, both white collar workers and blue collar workers need to constantly be upgrading their skills. this entails going back to school in many cases. Also, the argument posed by Bhagwati brings us back to our thesis that the missing ingredient in today's education system is a foundation in financial and economic literacy. We cannot stop technology from coming-progress is always forward in direction. However, we can give students young and old a solid foundation in the workings of financial markets, and economics, so that they can learn how to build assets, and make those assets work as hard as they are on upgrading their skills.

Wednesday, December 13, 2006

Assuaging the Anxious Middle

On Monday, December 11th, Larry Summers posted another column to the FT entitled "Only Fairness Will Assuage the Anxious Middle". ( In this column, similar to the first one on this subject published October 30th, he outlined the problems of the anxious middle class in a globalized economy, and offered suggestions, and solutions. He said that policymakers in responding to their constituencies over the election results, must not forget that globalization has enabled the US economy to enjoy the favourable combination of low unemployment and low inflation of recent years, and that without open markets, product prices would be rising much faster, further attenuating living standards for middle class families. He said "if the anxious middle's concerns about fairness are this serious when the unemployment rate is 4.4% they will be far greater whenever the economy next turns down." Well said. He then remarked, "this puts a premium on finding measures that go with the grain of the market system while also responding to concerns about fairness." Larry's solution: restore the progressivity of the tax system.

However, there is even more Congress could do to enlighten the masses on savings, and accumulating wealth. They could provide from K to 12 economic education, and financial literacy, so that every student obtains the knowledge they need to survive and thrive in the capitalist system. Remembering the words of Alan Greenspan in his speech on Education at Boston College, March 12th, 2004---he said "To be sure, a hallmark of our market-based economy has been that we have placed much greater emphasis on the need to provide equality of opportunity than on equality of outcomes. But equal opportunity requires equal access to knowledge. We cannot expect everyone to be equally skilled. But we need to pursue equal access to knowledge to ensure that our economic system works at maximum efficiency and is perceived as just in its distribution of rewards." Once again, we come back our main theme: if we provide access to knowledge about the workings of the economic system, and financial markets, we will have more informed, and knowledgeable citizens who can participate more effectively in capitalism. This is an idea whose time has come.

The Global Middle Cries Out for Reassurance

In Larry Summers first column for the Financial Times, dated October 30th, and entitled "The global middle cries out for reassurance", he said that economists rightly emphasize that trade, like other forms of progress, makes everyone richer by enabling them to buy goods at lower prices. But this offers small solace to those who fear their jobs will vanish. John Kenneth Galbraith was right when he observed: "All of the great leaders have had one characteristic in common: it was the willingness to confront unequivocally the major anxiety of their people in their time." Meeting the challenge of the anxious global middle is the economic challenge of our time. The best parts of the progressive tradition do not oppose the market system; they improve on the outcomes it naturally produces. That is what we need today. You can find this column and the dialogue at Martin Wolf's blog.

My response to Larry is as follows----many people in the middle are missing out on enjoying the benefits of asset building, which requires knowledge about the workings of the economy and financial markets. If we give this to them, unequivocally, for free, they can learn, and from there they can participate more fully by owning real estate, stocks and bonds. There is nothing better to relieve the angst of job loss, than knowing you have assets to fall back on. We need to encourage savings early from childhood; not when a person begins to work. Einstein said the theory of compounding interest was one of the most beautiful concepts. He was right.

Monday, October 23, 2006

Comments by Jim Cramer at NCEE dinner

One of the funniest, and most thought provoking moments of the NCEE evening came when Jim Cramer gave his 2 minute remarks upon receiving the NCEE Visionary award. He said, "there is real trouble in our country today because big stars, athletes, and celebrities of all types don't want to talk about the money they have made." "No one wants to talk about the money", he said. (This reminded me of the speech I gave at the National Press Club inWashington on March 3rd, 2005 at the NCEE annual summit. I said that no one wants to talk about the money because of Americans Puritan roots--people just don't like to talk about money, and how much they have.) Cramer went on to say that he spent one evening last week with his high school daughter dissecting a sting ray at school. He said "dissecting a sting ray-now what's that? Did she learn what a stock or bond is? No. She'll have more of a connection to that guy Steve on Discovery Channel than she will to me". Of course, Cramer is absolutely right-we are leaving kids absolutely rudderless in a capitalist system without any tools to navigate.

The 2006 Visionary Awards

The National Council on Economic Education recently presented the 2006 Visionary Awards, which honor champions of economic empowerment.

Honorees include:

  • Jim Cramer, Host of Mad Money on CNBC and founder of;
  • Stephen Dubner, co-author of the bestseller, Freakonomics;
  • John Whitehead, Chairman of The Goldman-Sachs Foundation and the Lower Manhattan Development Corporation;
  • Kathleen Kelley of Kingdon Capital will accept a special community service award on behalf of High Water Women, a charitable organization composed of women in the hedge fund industry, dedicated to supporting women and children in New York City; and
  • Harold McGraw III , Chairman, President and CEO, of The McGraw-Hill Companies, will receive a special recognition as outgoing Chairman of the NCEE board of directors.
Read more at the NCEE

Thursday, October 19, 2006

Kathleen Camilli on Bloomberg Podcast

You can listen to Kathleen Camilli's interview by Tom Keene of Bloomberg Radio here. (Mp3)
It includes a discussion of interest rates, inflation, savings, and economic education.

Tuesday, October 03, 2006

Dr. Annamaria Lusardi at Dartmouth discovered the following in her research on financial literacy:

Anna Maria Lusardi's research shows that when asked the question: Do people understand basic interest compounding, inflation, and risk diversification---only 56% of those surveyed correctly answered questions on inflation and compound interest. For more information on her presentation at the NABE annual meeting, go to

Did you know that mostly older people benefited from the 1990's run-up in wealth?

Federal Reserve Board researcher Karen Pence wanted to know which groups had benefitted most from the 1990's run-up in wealth. She discovered that 1) older households had the largest gains 2) A 65-yr old in 2001 was $100,000 wealthier (median) than a 65-yr old in 1989. and 3) A 35-yr old in 2001 was no richer than her 1989 counterpart. For a copy of her presentation at the NABE annual meeting in Boston on September 9th, 2006 go to

On September 8th, 2006 at the Annual meeting of the National Association for Business Economics, Kathleen Camilli hosted the session entitled "Household Wealth and the Savings Rate, with presenters Dr. Annamaria Lusardi from Dartmouth, and senior Federal Reserve Board staffer, Karen Pence. For a copy of the transcript, go to

Wednesday, September 27, 2006

Household Wealth and the Savings Rate

In our latest edition of "Economics for Your Life" we discuss the US savings rate in the context of overall wealth in the US economy. While many traditional economists fret over the low level of US savings, we trace the precipitous decline in the US savings rate back to 1980, and tie it to the secular bull market in US equities, and investments in real estate. We conclude that Americans are actually much better off than the savings rate alone would lead one to believe because their wealth is tied to real estate appreciation. The lesson here is that it is important to look at all data in context. The rising level of household wealth in real estate, an increase of $8 trillion since 2000 says much about the spending behavior, and resilience of US consumers. For a copy of this latest issue of "Economics for Your Life", see our website at