The CEO Game

Was the crisis a catalyst that helped the rich getting richer or did it actually minimize the gaps between the poor and the rich? What is going to happen to the size of the gap in the future?
The gap between the rich and the poor is slowly growing. This gap has been growing for a long period of time and nothing seems to be stopping it. Many economists that support the business cycle theory, which states that when rich families and organizations lose their wealth over time to new rising tycoon this new tycoon is a better fit for the times. This is because we live in a frequently-changing world in which new innovations and new markets are appearing all the time.

You need money to make money.

The tool for measuring “fairness” of the distribution of wealth is the “Gini coefficient“. This tool can point out how the wealth is divided by the general population. A coefficient of 100 would describe a situation in which one individual holds all the income of the country. Although this is only a theoretical value, there are some countries, especially monarchies and dictatorships that have high “Gini coefficients” such as Sierra Leone with a coefficient of 62.9. In the United States the “Gini coefficient” is 45.2 (2006); this is high compared to Great Britain, which has a coefficient of 34 (2005). While capitalistic, democratic countries are mostly in the middle of the range, the communist countries mostly get the lowest values possible. For example, the Czech Republic has a value of 26 due in part to the influence of the former communist regimes. This measurement tool reveals a high correlation between the form of government and fairness.

One major ingredient that helps the rich get richer is capital. You need money and a lot of it in order to invest in the stock market or in new projects. Most of the people lack the critical amount of money to invest or the proper motivation and vision which are required in order to invest their money and gain more than the normal interest rate over a long period of time. If we look at the cost of the human work force over the years, we will see that it is getting very expensive. But we will not stop consuming products just because they are expensive. If the human cost in production will get too high we will have to find new ways to lower the cost, especially by technological improvements. So in the future, robots and computer algorithms will take care of the production line and services. This progression may lead to a more equal society and a better distribution of wealth, but in order to keep human advancement we must reward individual that creates innovation and new technological improvements, or otherwise our society will look more and more like Communism, and Communism paralyzes any desire to innovate because people do not earn much from their hard work.
In conclusion, in my opinion the gap between poor and rich will keep growing, but at a slowing rate as more and more people invest their time in developing new frontiers.

Omri.

The CEO Game.

The ground is shaking; the world is braking, as we enter a new era.

The balance of the global economy is fragile and constantly changing, but now we ourselves are on the verge of a major power change. This change is so comprehensive and great that it will affect every aspect of our lives.  I’m talking about the eroding power of the greatest empire of the modern world: the United States of America.

Losing Money in Iraq

In this article, we’ll discuss how and why the world is moving in this direction, if it is inevitable or if we can fight to maintain the USA’s position as a spiritual, cultural, and economic leading force and if these changes are for the best or if it is just the dawn of total chaos in the world.

It’s well known that America has declined in its status as the leading force in the world over the years. The USA is like a sinking ship; the only problem is that in a global world in which we live this ship is tied to all the other ships.

But what caused the bubble to burst in our face so suddenly one year ago. In my opinion there are several major failures or unwise economic behaviors that brought us to this point, yet, at the time, many of these actions seemed so right

The first reason is the horrible terror attack of September 11^th. This unprecedented event was the trigger to a chain of events such as the change in the paid interest rate direction—it decreased in order to help the market pull out of the economic stress and overcome the uncertainty that followed the September 11^th. This greatly damaged the economy because people tend to take more loans when the interest rate is low in order to invest or consume. Because the American tendency is to consume, many people took loans in order to continue buying goods they could not afford.

The USA is not a leading supplier of goods, because comparative advantage of the USA lies in a highly qualified work force and not in industry products. And so, the USA began to import more and more products from other countries, especially China. This ultimately caused the dollar’s value to drop, especially against the Chinese Yuan.

On top of this, the USA had to fund the war in Iraq that cost a lot of money and had many logistic and economic problems. In addition, it has to find a way to confront the new terrorism threat, which is also money consuming.

It seems clear that the age of US economic hegemony is over. The implications for its cultural and political dominance remain unclear. Perhaps the US should look towards former colonial titan Britain as a model—the former empire knows a little bit about how to handle the end of an era.

Omri.

The CEO Game.