I attended a seminar this evening presented by one of our largest banks (name not mentioned to protect some friendships). A middle manager introduced Eugene White, an economist from Rutgers. “I earned nothing last year,” said the hard-working bank employee. “Zero for 2008. No bonus. No options. No stock.”
Over dessert and coffee I asked one of the guy’s subordinates if the boss wouldn’t also have gotten some sort of base salary. “Sure,” he replied, “but maybe as low as $500,000 per year.” How did that round to zero? “Well, he might have made $12 million the year before.”
And you thought Peano arithmetic was challenging….
[What did we learn at the seminar? Professor White showed a comparison of events 1920-1936 with events 1990-2009. The similarities that lead many to say that we’re going into a Greater Depression were acknowledged. White claimed that the main divergence is in monetary policy. This time we lowered interest rates and expanded the money supply much earlier into the downturn. White said that he was confident in an eventual recovery because we still had some productivity growth. An attendee asked about risks from changes in government policy and taxation, noting that there was very limited productivity growth during the 1970s due to high taxes and limits on the ability of businesses to deduct (depreciate) capital expenses. White did not have a convincing answer to any question involving Congress, taxes, and the expansion of government.]