Citi is hiring! . . . or NOT

As the economy continues to sour, consumers have gone on strike. For the past few months, I have been contemplating the following economic and social trends that seem to explain why.

• American productivity has risen almost 20% in the last decade (Source)
• Real median income over the same period has declined (Source)
• Executive compensation has risen astronomically (Source)
• Consumer debt has risen substantially (Source)
• Consumer spending comprises 70% of GDP

Rising productivity is what enables companies to increase employee’s pay. Increases in pay result in the overall rise in our standard of living. However, in the last decade, this relationship between productivity and rising employee pay seems to have been fractured.

Dan diBartolomeo is the head of Northfield Information Services, a Boston financial analysis firm. He has a long history of analyzing investment strategies and complex securities. His comparison of financial markets to the rigors of engineering is noteworthy.

As they say on Wait, Wait, Don’t Tell Me, “and now for some quotes from this week’s news.”

First, a delightful blog I discovered called The Big Picture by Barry L. Ritholtz. In a post titled The Underlying Basis of Finance and Credit, Mr Ritholtz observes:

For 99.9996% of the last 1.2 million years, loans were granted primarily on the condition of whether or not the lender believed that the borrower could repay. Between 2002 and 2007 this condition was dropped.