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Was Anyone Else Disappointed by the Latest GDP Figures?

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message 1: by David (new)

David Abraham | 44 comments I shouldn't but I cant help myself. The author, Debo, relies on unproved premises that 1) an economy should always be able to grow at the same rate no matter how big or mature it gets, 2) that somehow one recession is the same as another in terms of how long it should take to get beyond it, 3) that all economic upturns and downturns are cyclical rather than structural and 4) that the reasons for all this are captured in his/her 3rd sentence. There, I am done.


message 2: by David (new)

David Abraham | 44 comments Hi Debo,
I knew I shouldn’t have started as I don’t have time for a one on one economics discussion. However, this one time.
You missed my point re: growth of a new economy or a mature one. Just as companies new to the stock exchange can experience growth rates of 2-3 digits per annum while mature companies are constrained to slower growth, so too with entire economies. It is fundamentally unfair to expect as mature an economy as ours is to perform at the same growth rates as 20 years ago. Second point is answered by point #1. Third, the structural change I am talking about is the use of intelligent machines: automation, AI, and finally robots (and of course cheap off-shore labor). These have been having a slow but deadly impact on human employment for three decades and it is speeding up. The only folks who will be spared in this drive to zero human employment (a long-term inevitability) are 1) those with low enough wages to compete with the machines and 2) those in charge of deciding whose work will be replaced. The structural factors you mention are all part of cyclical changes. Finally, I have no acceptable level of GDP growth as that number hides more than it reveals. The middle class has been collapsing for nearly 40 years, and the numbers of new millionaires and billionaires has been steadily rising, although the raw numbers dropping into poverty more than makes up for that good news. IOW, the GDP growth over the past 40 years has looked pretty healthy on average, but more and more folks are hurting. IOW, I find your question about acceptable level of growth to be a goal that distracts us from the real problem. I hope I have answered all your questions as I cannot do this again, I just don’t have the time. In front of a packed house, live, I’d do it again.
David


message 3: by David (new)

David Abraham | 44 comments I should add that I am pretty informed reL economics but I subscribe to no THEORY of everything, as I put everything through my informed-reasoning capabilities. I am FAR from being a socialist or a purist free-marketer either, I just analyze situations with my informed common sense (I prefer capitalism that is well-regulated, like Adam Smith). LOL!


message 4: by David (new)

David Abraham | 44 comments Thanks Debo, you too.


message 5: by John (new)

John | 15 comments "Joyless recovery" gets overused, but I think it perfectly captures the current state. When I go through the different economic metrics I track, they almost all look excellent. In short, it isn't reflected in the popular mood, but I really think the economy is absolutely humming in high gear. We will look back on 2014/2015 as examples of the good times. (And just to head off the objection - yes - wage growth has been the one metric that has been sluggish - not horrible, but sluggish, and even that is starting to pick up)


message 6: by John (new)

John | 15 comments Debo, I've been wrong before and might be on this as well. My view is that for whatever reason, people have been very slow to regain the "animal spirits" that we usually associate with the good times. I still hear people say we are in a recession! (though not as often) This cautious mood shows up in a higher than expected savings rate. However, it is also true that my mental picture of the good times is colored by my experience during the last two cycles which I would argue were abnormally frothy and exciting. My reading of history suggests that the normal business cycle is more mundane. So no, this doesn't feel like 1999 or 2007, but it is still really good.

I'm still on the fence as to whether income inequality is an inherently bad thing. I've flip flopped a couple times already. What I have more conviction about is that the growing global digital economy should facilitate more wildly successful individuals. The Vietnamese creator of Flappy Bird always pops into my head when I ponder this issue. It is easier than ever to be successful on a global scale. Whether we should do something to prevent that or force redistribution of those successes is a harder question for me to answer.


message 7: by David (new)

David Abraham | 44 comments John, I think that no one on Earth questions "whether income inequality is an inherently bad thing" as the only alternative is "income equality" which no one I have ever met wants. What they question is the degree of it compared with a) our own history and b) other nations' inequality. It is historically high and comparatively high and that is the issue. There comes a point where the academic exercise falls apart and people start taking to the streets instead of starving to death. The full-employment economy is dead and it is being replaced with ever increasing unemployment as the economic STRUCTURE changes toward more and more automation and robotics.


message 8: by John (new)

John | 15 comments David,

Just to get this out of the way, I find your confrontational tone annoying. But moving on, if we really wanted to debate this properly, we would need to distinguish between wealth inequality and income inequality. I realize they are related, but they are different. It doesn't bother me if Elon Musk risks everything on his ambitious ideas and ends up a multi billionaire. It does bother me if he hands his billions to his kids who never had to take any of the same risk or put in any of the hard work. I would support an extreme estate tax if I didn't think the wealthy would just circumvent it. But to your specific comment, our history is actually full of extreme wealth inequality (Pharaohs, feudalism, etc). That is the historic norm. Europe and Asia have a more entrenched upper class than the United States. In generally, I'm pretty happy to let the markets determine income dispersion - which will create new wealth for some. I admit that has flaws, but the alternatives seem worse.

I saw your earlier comment about zero-human-employment and I don't buy into that thesis. I've thought about it quite a bit. My best guess is that the complexion of our labor simply continues the slide toward services and away from manufacturing. There will always be some manufacturing. Some of us will want to spend more for a hand-made guitar or watch even if we could get a machine-made version for free. And if I don't have to spend money on most "things" I will desire more experiences or entertainment. My thesis is that we will always have jobs.


message 9: by David (new)

David Abraham | 44 comments John, I re-read my posting and I do not find a confrontational tone. Maybe what I said was confrontational to your beliefs but my tone was neutral as can be. The historical comparisons that I was making did not mean to go back to the Pharaohs or Feudalism, just the last 100 years or so in this country and a current comparison between countries. Yes, we do look better than days of old, no question, but no implied comparison either.
Yes, we will always have "jobs" but the quantity of human labor in total person-hours is on an inexorable downward slope due to technological advances that began decades ago and will continue for many more decades.


message 10: by John (new)

John | 15 comments Debo - I guess I would say that, yes, the lingering impacts from the last recession are larger than normal. Specifically, the contingent of long-term unemployed remains stubbornly high. While I am tempted to write off your comment by saying that there are always some displaced individuals in any recovery, that would be disingenuous because the numbers are higher than normal. So we can't dismiss those voices, but I do think the picture looks very good if we can step back and view the economy in aggregate. And I would like to point out that while nominal wage growth has been anemic, households have been able to refinance their debt and, more recently, benefited from lower energy prices - both of which increase disposable income.

You mentioned housing. I'm glad you did. I keep trying to find the equivalent frothy sector for this cycle but it isn't obvious. My best guess is biotech, venture capital/private investments, or the un-questioning pursuit of education degrees (as distinct from pursuing an actual education). Commercial real estate is also getting pretty hot. Maybe the ultra low sovereign debt yields? I don't know - there isn't one thing that really jumps out to me. But almost everywhere I look, I see signs of strength. Auto sales, construction, non-farm payroll growth (especially if I adjust for retiring boomers), initial claims for unemployment insurance, the stock market, occupancy at retail properties, average daily rates at hotels, IPOs, the art market, consumer sentiment surveys, the VIX at 12.6, the types of vacations I hear my friends are taking, etc. Maybe even household formation although it sounds like there might be some technical noise distorting the metrics.

I'll stop - sorry that got long.

And congrats on the book! Not sure when or if I can get to it, but I admire the effort that goes into putting it together. Well done.


message 11: by David (new)

David Abraham | 44 comments But the "signs of strength" are all at the corporate level, not trickling down to working-class folks, and re-financing personal debt is no way to pay for a life. Just my 2c worth.


message 12: by John (new)

John | 15 comments The corporate sector does looks very strong, but things like initial claims, consumer sentiment, my friend's vacations, and household formation (if it holds) include mainstreet too. But I would agree that the top is doing significantly better than the middle and bottom.


message 13: by Trent (new)

Trent Rock (trentrock) | 6 comments John wrote: "I'm still on the fence as to whether income inequality is an inherently bad thing"
Some economists feel income inequality is a key part of capitalism and creates INCENTIVE.

The main metric used is The Gini Index
Someone mentioned income inequality and personal disposable income :)
http://research.stlouisfed.org/fred2/...

Is anyone here an economist? I doesn't seem like it...Not enough arguing!! ;)


message 14: by David (new)

David Abraham | 44 comments No one argues against income inequality, the argument is against a comparatively HIGH DEGREE of income inequality, compared with other industrial countries and compared with our past. We are at comparatively high values of the Gini index, that is the issue, the argument.


message 15: by Nancy (new)

Nancy Mills (nancyfaym) | 25 comments Do you think this is because we have lost so many of our manufacturing jobs? It seems that these jobs afford decent incomes and standards of living for average folks. What is the working class supposed to do now? We have so few opportunities. It is unrealistic to expect service jobs to pay what production jobs paid. What exactly do we produce here? Food, I know. Some machinery and cars and such. Racehorses. A lot of intellectual stuff which seems to be easy to pirate. I know I sound like a broken record going on about unfair foreign competition, but I think that's the problem.


message 16: by Nancy (new)

Nancy Mills (nancyfaym) | 25 comments Debo wrote: "Hi John – While I disagree with those that say we’re still in a recession, I understand that to a lot of people out there, it still feels that way because they either haven’t received a meaningful ..."

Debo, I was going to order your Kindle book, but I don't have a Kindle ... what is Kindle Cloud? Can I read it on my computer? Sorry, I am not really familiar with ebooks. It sounds like an interesting book.


message 17: by David (new)

David Abraham | 44 comments Nancy, Our economy, any economy, is DESIGNED by the govt, in this case with the aid of big businesses. The economy is designed to do what you are complaining about. It is up to persons like yourself to get more politically involved and force your elected officials to do YOUR bidding.


message 18: by Nancy (new)

Nancy Mills (nancyfaym) | 25 comments Short of revolt, how do you force those clowns to do anything? I mean, without waving a ton of money under their nose. I emailed my representative and got back a very ambiguous form letter explaining how he is so conscientiously looking after our interests (obviously, he is not anti-fasttrack) so I wrote back explaining why this trade agreement, like previous ones, would hurt the average citizen, and got back a machine telling me that this is a do not reply address. (I'll have to pursue it this afternoon.) I get the feeling they couldn't care less.
I do frequently rave to friends and coworkers about how we need to try and buy products made in the USA or countries we like, but I get the feeling most consumers are too strapped, too busy, too dumb or too apathetic to care where products come from. It does make shopping harder. Today I put back the cheaper Closeup toothpaste I like and deliberately bpught the Colgate which was marked Made In The USA. I did this with every product I bought. it took quite a bit longer and cost a bit more but it was satisfying.
But I get the feeling most people just aren't willing to bother. I hope I am wrong.


message 19: by David (new)

David Abraham | 44 comments Nancy,
If you re-read your post, you will notice soon enough that you may have put aside what may be needed. Revolt.

Buying USA is always good but until and unless everyone else does the same thing, it may feel good but it wont budge the needle.

As to your rep, they all try to make it semi-hard to contact them via the internet as it would bury them in mail. Try again, or better yet, visit their office (local or DC) or at least phone. And get beyond the receptionist. That stands a better chance. They WILL listen, but imagine their life if every constituent, if 1% of their constituents, contacted them once a year, they would have to triple their office help to keep up with the mail.

I said that our economy is designed. It is, by all the corporate bosses and their lobbyists who write the laws that benefit them. Obamacare was written by the health care INDUSTRY, Wall Street Reform was written by Wall Street. As long as these guys shovel the money, they are listened to by Congress, both sides of the aisle. There is no cost in the law to taking your factories overseas, no cost to hiring overseas labor, no cost to being able to shelter their profits. Amazing, right? We are being crushed by our own success. American law protects American labor in so many ways, thanks to the Union movement. But there are no laws in place that insist that foreign labor be treated as well as American labor. If a gutsy American manufacturer stayed here and passed on his extra labor costs to consumers, how many Americans would buy American? Enough for him to stay in business? You do and good for you. But we need laws to make things fair, not more Buy American consumers (my reason for saying that is we'd need 50% of consumers to make a difference).

Check out Movetoamend.org. It may seem at first glance too abstract, but it is not. Help them out. With your understanding and then your active participation.

And this goes for you lurkers too!!


message 20: by David (new)

David Abraham | 44 comments Debo, I am surprised at you, your book rakes Obamacare over the coals and here you suggest it was a GOOD thing, brought about by voter pressure. The ACA was written by the health care INDUSTRY, Dodd-Frank was written by Wall Street. WashDC is bought and paid for by corporate America. Revolution is the way to go, movetoamend.org for a start.


message 21: by David (new)

David Abraham | 44 comments Debo, you are trapped in the web of two-party thinking, and both parties thank you! The starting point of Movetoamend,org and MY starting point is that BI-partisanship is not the answer becuz both parties are beholden to corporate America and not to We the People. Our point about money is not whether more money wins elections but a) what it does to who wins (makes him beholden) and b) who it keeps from being competitive, like someone with no big money backing and all third-party candidates. The CHOICE (of the Republican or the Democrat) is NO CHOICE because they are all bought. Take the ACA, yes it is marginally better than what went before, but do you remember how long Medicare for All, the liberal solution, was on the table? Not a minute, with Democrats in total control. And how long the President supported the Public Option? Not long enough for it to become controversial. It was a reform with corporate approval. Did corporate America grouse? For the cameras. Look at their stock prices and see if they really complained! For a better explanation than I have just made, one that WILL convince you, please watch this video, http://www.ted.com/talks/lawrence_les....


message 22: by John (new)

John | 15 comments Yes, money will always have influence, and large corporations have money. But it isn't that simple. I don't know the healthcare industry as well, but the financial industry hates the Dodd-Frank Act and they hate being fined over and over and over... The fact that the banks and brokers have been the steady punching bag for Capitol Hill, the media, and mainstreet for six years suggests that it is not as simple as "money buys the laws".


message 23: by David (new)

David Abraham | 44 comments Wall Street does a good job complaining about its mistreatment and the press prints it because it sells. But check out the stock prices of big finance. Not all are doing great, but after the 2007-08 collapse many have recovered quite nicely thank you. Short term no one was hit so hard but they have recovered. Has middle-America?

As to the fines, chicken-shit, look at the stock prices following the fines.

As to "money will always have influence" yes, as long as YOU allow it.

Monarchies seemed part of God's Plan until some colonial profiteers decided to be done with it, and they changed the world. A big effort to be sure.


message 24: by Nancy (new)

Nancy Mills (nancyfaym) | 25 comments Debo wrote: "Nancy wrote: "Debo wrote: "Hi John – While I disagree with those that say we’re still in a recession, I understand that to a lot of people out there, it still feels that way because they either hav..."

I agree we need more political parties to choose from. I do not feel the democrats or the republicans are interested in anything beyond what it takes to get our votes.
I will certainly check out installing the Kindle Cloud so that I can read your book, Debo!
David I did get on movetoamend and certainly agree that corporations are not people and that they have far too much political influence. Unfortunately there is no chapter near me, but I will look at it more. I have written to my representatives in the past about this issue for what it's worth.
I will say that a Walmart ad in yesterday's paper got my attention. A big glossy picture featuring Crest toothpaste, Cascade dish soap, and a bunch of other products, with a headline bragging about how Walmart is proud to offer all these products Made in the USA. Not that I am Walmart's biggest fan by any means. But the fact that they felt it beneficial to invest in such an ad makes me think that maybe a good number of us are getting our message across. That we favor American made products and want the opportunity to buy them.
I can't believe the amount of Chinese fish products still in grocery stores, or that people actually still buy them. Apparently they do, but hopefully people are cluing in.


message 25: by David (new)

David Abraham | 44 comments Nancy, The MoveToAmend crowd may be about defanging corporate power but what is important about that is that corporate power OWNS govt until we take it back and until that happens we will all live in an economy defined by THEM, not by US. And, yes, economies get defined, they never are just THERE.
If you don;t have to shop at WalMart, don't do so.
We (the USA) may have killed our own fishing industry by succeeding so well (sometimes called over-fishing).


message 26: by Nancy (new)

Nancy Mills (nancyfaym) | 25 comments Debo wrote: "Nancy wrote: "Debo wrote: "Hi John – While I disagree with those that say we’re still in a recession, I understand that to a lot of people out there, it still feels that way because they either hav..."

I've been pondering your observations about the "Stuff" and I am not so sure I would necessarily call "More Stuff" an indicator of a higher standard of living.
So many of us feel we have no future, or at least a very dubious one, yet we have cell phones, giant TVs, video games and Wii doohickeys and cars that talk to us, and yet every month we get a stomach ache when it's time to scrape the money together to pay the bills. And we can't go to the doctor when we're sick because, although we have Obamacare, the deductible is $6250 and for many of us, that's like having no health care at all. You wait until you're at death's door.
I just think we are slipping. Up until around the beginning of the 21st century, it seemed like folks were "upwardly mobile." Now they mortgage their souls to send their kid to college.
But yeah, we do have a lot of stuff.


message 27: by Sunil (last edited Jun 09, 2015 12:42AM) (new)

Sunil | 5 comments Nancy wrote: I've been pondering your observations about the "Stuff" and I am not so sure I would necessarily call "More Stuff" an indicator of a higher standard of living.

Hello all. Really enjoying this discussion. Hope you don't mind me commenting, although I am not from USA!

How do you increase the standard of living? You can pay people more or make the things people need cheaper. Cheap imports are thus good in raising living standards! Businesses love cheap imports as it means they don’t need to give people pay rises.

But, if people buy cheap imports then they are not buying the things that businesses are making. If no one buys business’ products then they will make no profit and have to start sacking people and eventually close down. I guess businesses hate cheap imports as well as love them! This is one of the big reasons why the manufacturing industry gets destroyed by globalisation. It cannot complete with cheaper imported products.

This observation above isn’t my own by the way – Karl Marx made it in the 1860’s.


message 28: by David (new)

David Abraham | 44 comments LOL! This "observation" predates Adam Smith! It is hardly a socialist observation.

A built-in problem in economics is the problem that what is good for all is seldom good for one. Example: limiting production of X always sends the price of X higher, good old supply and demand. But no matter what the profit per unit, it is always in the interest of each producer to produce as many as he can. There is a huge problem with over-fishing, but it is never in the interest of a single fisher to limit HIS catch!


message 29: by Sunil (new)

Sunil | 5 comments Ha! Well, I never said Marx invented it just it was one of his observations.

I agree with your over fishing point. It is in the fisherman’s interest to catch as many fish as he can, so he can sell them, but if he’s too successful and over fishes he damages the fishing stocks which he relies on in the future. This happens over and over again throughout the world - overfishing has been an issue in Europe for decades.

Marx observed this same phenomenon which led him to conclude that this was a defect/contradiction in the capitalist system – capitalism uses resources to generate wealth but doing so damages the resources which it relies on in the first place. The conclusion he drew was that eventually the resources would be so damaged the capitalist system would fail. What we actually see happening is that the system continues by governments implementing policies to preserve resources (fishing quotas etc) to curb the tendencies of capitalism in its raw unchecked form.


message 30: by David (new)

David Abraham | 44 comments Any system where it is legal for anyone to extract resources from the commons or even from privately owned land will be subject to "the tragedy of the commons", where what is good for one is not good for all. It may be a "fault" of freedom, not just capitalism.


message 31: by Sunil (new)

Sunil | 5 comments Thanks for the quotes – it drew my attention to Hardin who I had not read much of previously. Unfortunately, I agree with his critics. I don’t think it automatically follows that people will perform actions contrary to the good of all. In pre-capitalist farming communities, herdsman did not overgraze the land automatically. They cared for the land as they relied on it. In a capitalist society, I think he has a point but this stems from the capitalist nature of society rather than the nature of people.


message 32: by Trent (new)

Trent Rock (trentrock) | 6 comments Debo wrote: "Which in my view, includes enacting policies that will lead to a wider distribution of the country's economic gains "
That's kind of the current debate. Should the president and congress enact policy that lowers income inequality? I say no.

The bigger question is does income inequality slow down growth for all?
Economists have been arguing about this for decades.

http://en.wikipedia.org/wiki/Kuznets_...

https://www.google.com/url?sa=t&r...

http://www.washingtonpost.com/blogs/w...


I would chart Gini Index against real gdp growth and real disposable personal income per capita
And see what comes up
Of course there is the whole "correlation is not causation" issue that comes up a lot in economics.
https://research.stlouisfed.org/fred2...

I'm kind of on the fence on this one. I'm not convinced it hurts overall growth. I not convinced it helps , either...lol


message 33: by David (new)

David Abraham | 44 comments Debo,
You said: "Should the president and congress enact policy that lowers income inequality? I say no."
Saying NO to this is saying yes to "Should the president and congress enact policy that RAISES income inequality?"
Taxes always redistribute wealth and income, that is what they do, by DEFINITION. So you will always AFFECT inequality, by making it less or more.
You sure you mean NO?


message 34: by David (new)

David Abraham | 44 comments Not to mention that there is a whole school of thought that is winning wide-spread respectability that says that persistent economic growth is not sustainable or even desirable.


message 35: by David (new)

David Abraham | 44 comments Technically, we are not in a recession. Nonetheless, we are up the creek without a paddle and all because politicians not economists make economic decisions. And they only listen to economists when it suits their political agenda. And all of this nonsense happens only after they have served their true masters, their big dollar funders.


message 36: by Sunil (new)

Sunil | 5 comments David wrote:Nonetheless, we are up the creek without a paddle and all because politicians not economists make economic decisions.

A lot of politicians have economic backgrounds and they also employ economic advisers. Every economic political action that is taken you will find some economists for it and some against it.

Governments leave the market alone and recession happens and they implement policies to control the market but recession still happen. No matter what governments do, economic crises continue to happen on a regular basis. It appears as though economic crises are fundamental to the nature of the capitalist system.


message 37: by Nancy (new)

Nancy Mills (nancyfaym) | 25 comments Not sure I buy that Sunil. in the US the government has really wreaked havoc with the economy at times. for example when they decided everyone had a "right: to own their own homes, and demanded that mortgages should be obtainable by anyone, no matter how uncreditworthy. thus the real estate bubble and its collapse, leaving people homeless and jobless and banks holding (and allowing to decay) real estate worth half what was owed on it.
Trade policies also seem to have a huge effect on economies. see China manipulating currency to keep their products cheap and exports up.
also the growing debt in the US must have the effect of the government demanding to borrow money thereby driving interest rates up on funds that could otherwise be used for businesz investment.


message 38: by Sunil (new)

Sunil | 5 comments Pretty much every economist agrees that recessions are caused by a lack of demand in the market. Whether this is caused by high inflation, interest rates, lack of liquidity etc is a matter of debate.

Nancy, all the instances you mention are examples of governments trying to increase demand to prevent a recession. If more people have a right to buy their house then demand for houses rises. If china makes their goods cheaper then more people will buy them. If consumers take on more debt then they will be able to spend more as they'll have more money to spend.

So government action to increase demand and try and prevent recessions has wreaked havoc. On the converse, things were also pretty bad when governments left the market completely alone a few hundred years ago.


message 39: by David (new)

David Abraham | 44 comments Well, of course I meant economists not working for any politicians! And I am in basic agreement, but I would say that it is FINANCE not raw capitalism that causes econ crises. Remember tulip mania. TRADING tulip contracts was a sure way to get rich quick. With no MARKET for FUTURES there would have been no mania. FINANCE puts an entire economy at the mercy of its gamblers.


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