GLOBAL ECONOMIC ISSUES

GLOBAL ECONOMIC ISSUES

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Global Economic Issues

Overview

The article “Millionaires who don’t have any money face having to work to 70” by Andrew Allentuck featuring on the Financial Post on September 18^th 2014 illustrates a common occurrence of a large number of wealthy individuals who lack adequate liquidity. The author notes that it is common for individuals who qualify to be classified as rich, lack adequate incomes due to increase in the costs of living[1]. The author notes that a majority of the working rich, sought to prolong their lives in employment to meet the increase in daily expenditures. The lives of the millionaires provided in the article are illustrative of the decline in the value of incomes despite an increase in the cost of living.

The IS-LM model in macroeconomics seeks to understand the relationship and interactions of aggregates of the economy such as national product and income, expenditures of consumers and their respective savings and outputs of producers verses the invested capital. In the basic IS-LM model, consumer’s expenditure is relative to the disposable incomes availed and the prevailing rates interest in the money markets. This means that the disposable national income is identical to the national incomes with exclusion of the taxes paid up towards the government.

Analysis

The savings rates have been negative for years, whereas the assets of the couple are held up in real estate leaving them with inadequate liquidity to finance their daily expenditures upon retirement. Repressed returns by the central banking attributed to low interest rates are evident in the article[2]. The investment curve presented in such a case would provide a relation of the role of the central bank oriented interest rates and the levels of incomes accrued by the couple. They are a representation of a majority of individuals in Canada who are unable to make savings given that their income levels are inadequate to provide them with disposable incomes, which can be invested into equities or savings. Furthermore, the low savings is attributed to negative rates, which induce public spending rather than savings as a means of enhancing money supply in the Canadian economy.

Reference

Andrew Allentuck. “Millionaires who don’t have any money face having to work to 70.” Financial Post. Last modified September 18, 2014. http://business.financialpost.com/2014/09/18/millionaires-who-dont-have-any-money-face-having-to-work-to-70/

[1] Andrew Allentuck. “Millionaires who don’t have any money face having to work to 70,” Financial Post, last modified September 18, 2014, http://business.financialpost.com/2014/09/18/millionaires-who-dont-have-any-money-face-having-to-work-to-70/

[2] Ibid