The wealthy save a much larger part of their income than do workers or the middle class, and use a much smaller part for consumption, rising income inequality automatically reduces overall consumption and forces up savings by effectively transferring income from high consumers to high savers. If lower consumption is not balanced by higher investment, total demand must decline. To prevent this from happening, Washington typically does one of two things. First, the Federal Reserve can implement policies that encourage household borrowing to fund additional consumption. In that case, the reduction in the income share of ordinary Americans is balanced by an increase in their borrowing, so the same level of consumption can be maintained. Second, Washington can itself borrow and use the proceeds to replace the demand lost by the reduction in household consumption. Related: Pettis On CBO Numbers
- Date Posted:
- July 26, 2023
The last time there was a major slowdown in the mighty network of ocean currents that shapes the climate around the North Atlantic, it seems to have plunged Europe into a deep cold for over a millennium. That was roughly 12,800 years ago when not many people were around to experience it. But in recent decades, human-driven warming could be causing the currents to slow once more. New research published in Nature Communications [projects] the Atlantic Meridional Overturning Circulation, or AMOC could collapse around midcentury. Were the circulation to tip into a much weaker state, the effects on the climate would be far-reaching, though scientists are still examining their potential magnitude. Much of the Northern Hemisphere could cool. The coastlines of North America and Europe could see faster sea-level rise. Northern Europe could experience stormier winters, while the Sahel in Africa and the monsoon regions of Asia would most likely get less rain.