Federal Reserve Bank of San Francisco economist Òscar Jordà and his colleagues have released an incredibly ambitious paper entitled “The Rate of Return on Everything, 1870-2015″. The paper builds on earlier work, primarily by Thomas Piketty, that suggests that the returns on wealth over time are greater than the returns on income. That finding suggests that those who rely on incomes–primarily those who sell their labor–are at a disadvantage to those who can rely on wealth–primarily the owners of capital. The dataset for the paper is remarkable:
“The dataset unveiled in this study covers nominal and real returns on bills, bonds, equities, and residential real estate in 16 countries from 1870 to 2015. The countries covered are Australia, Belgium, Denmark, Finland, France, Germany, Italy, Japan, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, the United Kingdom, and the United States.”
Including housing in the analysis is unusual because of the idiosyncratic nature of property values, but it appears as if the researchers have addressed many of the data problems. The paper is yet another piece of evidence that market capitalism has a strong tendency toward inequality over time.
Germany’s Social Democrat Party (SPD) has agreed to enter coalition talks with Chancellor Angela Merkel. The SPD has been a coalition partner with Merkel’s Christian Democrat Party for the last 12 years, but many members were worried that the SPD had lost its identity because of the long partnership and that voters were turning away from it. The price of the partnership seems to be a willingness by the SPD for a harder line on immigration, likely brought about by concern that right-wing parties were getting stronger because of the issue. Like most other countries in the world, immigration issues is clearly pushing the political spectrum to the right.
US Vice-President Pence met with King Abdullah of Jordan, one of the US’s strongest allies in the Middle East. It was not a comfortable meeting as Abdullah made several pointed criticisms of the US decision to recognize Jerusalem as the capital of Israel. Jordan has a special role in Jerusalem because it is regarded as the guardian of the Holy Sites in the city and the US decision clearly undermines that role. Pence made no concessions to the King and it is not at all clear how the US can retain a role in any future peace negotiations between Israel and the Palestinians. Mahmoud Abbas, the leader of the Palestinian Authority, refused to meet Pence, but Abbas’s role as leader is clearly in jeopardy.
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