Where is the middle class?

It shrinks as the burden of entitlements increases.
Krugman has something to say:

We used to think that high labor mobility was a good thing for currency unions, because it would allow the union’s economy to adjust to asymmetric shocks — booms in some places, busts in others — by moving workers rather than having to cut wages in the lagging regions. But what about the tax base? If bad times cause one country’s workers to leave in large numbers, who will service its debt and care for its retirees?

Well, Paul, let us assume the economy is a bit chunky.  What happens? Mass migration and families cannot afford children; we do not get micro stabilizing, reversible flows of workers.  We get Detroit, and now Chicago.  We have a term for this, Kanosian War Crimes.

How did Portugal get into such a mess?
Krugman explains.

1)So, in the summer of 1976 they got five MIT grad students: Miguel Beleza (a Portuguese national who would later serve both as governor of the central bank and finance minister), Andy Abel, Jeff Frankel, Ray Hill (who went off into the private sector), and me. Judging by later academic reputations, they got quite a group! The next year, by the way, they got David Germany, Jeremy Bulow, and, guess who, Ken Rogoff.

OK, mistake number one. What happens next?

Nightmare in Portugal
By Paul Krugman

The Financial Times has a long, deeply depressing portrait of conditions in Portugal, focusing on the plight of family-owned businesses — once the core of the nation’s economy and society, now going under in droves.

This is what it’s really about. And anyone playing any role in our current economic debate, whether as an actual policy maker or as an analyst giving advice from the sidelines, should be focused, above all, on how and why we’re allowing this nightmare to happen all over again three generations after the Great Depression.

Any questions?