I'm not an economist, but here's my view from the ground:
1. High unemployment, preventing consumption
2. High debt load (student, home, credit card) for prime age consumers, preventing consumption
3. Low wages and stagnant wage growth for prime age consumers, preventing consumption
4. Low job stability, leading to cash-in-mattress, preventing consumption
5. Low worker actualization and agency, leading to more time and energy spent at work, preventing consumption
6. Long term poor access to wealth-building financial instruments for most people, reducing accumulated wealth over time, reducing consumption
So as you can see, my opinion is that consumption is weak because people don't have enough money. The WSJ article has a small paragraph about tepid consumer spending, so I guess we agree there.
Aside from these core issues, I'd also speculate that a tremendous quantity of money is trapped in financial instruments. If it's in a financial instrument, it isn't exactly employing people or building goods or creating demand for goods. The same could be said about the billions of dollars held close to the chest by the oligarchy.
There's a huge opportunity here to have a government public works program or some other major initiative to mobilize the underclasses, but it won't be taken.
None of these issues are specific to Q1 2015, and they won't be fixed in Q2, Q3, or Q4.
An interesting analysis at http://charleshughsmith.blogspot.com/2015/05/us-households-u... echoes these observations, concluding "How do you support a consumer economy with stagnant incomes for the bottom 90%, rising basic expenses and crashing employment for males ages 25-54? Answer: you don't."
We need a debt stimulus for the lower class, by lower I mean the bottom 90%.
Back when they gave the stimulus to the banks, it almost would have been better to get money/stimulus to the people to use strictly to pay down debt (credit card, home, student loans). Even if it was only a chunk, not only would this have helped free up debt load, it would also go directly back to the banks that had been lending to the lower 90% all along.
Instead they gave money to banks to help with loans/lending, overlooking the fact that it does nothing to help consumers. They gave it to groups that weren't really lending to the 90% of consumers.
Trickle up is not just trickle up, it is trickle up and down. When you give money to the lower 90%, most of them give it right back. When you give it only to banks and upper 10%, it typically stays locked up in that 10%.
Anybody surprised by this consumer economy sputtering hasn't been looking at it and doesn't get that you need to get money to the lower classes to prop up the upper classes and banks.
Wages have stagnated this entire century so far, when people were surprised in 2008 when it came crashing down, it wasn't housing alone, it was that people had no money, less raises, while costs rose immensely.
I won't go into the trillions on war spent on credit by the country as well that further harmed the downturn. We financed the wars with China's credit, it is almost as if China wants to break us with debt and ongoing, un-winnable wars. We aren't playing the game very smart and the greed is thick.
In the future, stimulus should mean lowering debt loads of personal and state debt from the bottom up. Again, rich people mad by this aren't thinking it through, it is a two step hop and it is right back to them. But you'd have the lower classes now with more debt room and or room to spend. This is the only fix.
If you were playing a simulation to create a good economy in a game, you'd probably do something like this instead of enrich modern day kings to hold onto, hoard and lock up more money in the upper 10% backdrift that does not make it's way to the lower 90% with enough force.
It's surprisingly short sighted of businesses (banks) to not have pushed for consumer bailouts with say... vouchers for paying down mortgages or other bad debts. The banks collect, and people are left with a lighter load, and are more likely to re-spend.
Do banks assume that bailout + people making payments on underwater mortgages is, in the end, more profitable than bailout + lower debt loads and increased spending? An awful lot of people just walked away from their homes and mortgages.
...and the banks ended up with those houses. Which were then packaged up and sold as rental back securities[1]. Rent-seeking in the most literal sense.
It's an interesting theory that this was a conspiracy by the banks.
Either way, a lassez faire market naturally forces this type of evolution without proper controls by a governing body. It makes complete sense that profits can be maximized if "consumers" (what the rest of us call people /s) have to continuously pay to use things that they depend on.
And the banks already get a handout with the mortgage tax deduction.
We should have said, listen you fucks, collectively, across the board, you are writing off a massive amount of debt owed. They get money at 0 to negative rates and screw over the public at the same time.
Honest question, here - I don't have much of a theoretical or practical economic. how distinct is your proposition from actually, explicitly, printing money?
Printing money lessens the value of the dollar and makes lower class dollars worth less. Mostly because they are paying interest and many don't or can't invest in the market which sees offsetting gains when the value of currency goes down.
Short answer: when you print money, borrowers and non investors lose money, while lenders and investors gain more. It creates more imbalance.
Printing money does not get to consumers to spend, the 90% we are talking about, not the upper class which already knows how to make money when more money is being printed.
Our economy is heavily consumer focused, there aren't enough wealthy people to spend needed amounts to account for the whole populace/economy. Wealth by nature is hoarding/saving and only investing for returns.
If you look at it like a distributed system, giving money to lower class to improve the economy is to bittorrent/distributed decentralization where giving money to banks and the wealthy only is more like a centralized single point of failure that leaves many out.
When you do a stimulus for the lower 90% you will have guaranteed spend and increased buying from all areas of the economy, when you do a stimulus for banks and wealthy you only fund endpoints (wealth centers/investment/loans) throughout that have too much demand on each endpoint. The lower will spend at any time, even in down turns, the wealthy only spend in booms or extreme busts due to the nature of investing. If we looked at stimulus more like a distributed system, we might be better off.
Side note: The Iraq war cost for instance 1.7 trillion and will go up to 6 trillion:
The U.S. war in Iraq has cost $1.7 trillion with an additional $490 billion in benefits owed to war veterans, expenses that could grow to more than $6 trillion over the next four decades counting interest, a study released on Thursday said [1]
There is 1.2 trillion in student debt. What was a better purchase? Iraq war or paying off student loans here that will turn into a huge lower end stimulus? It isn't just an offset either, the country has 1.2 trillion in student loan debt and upwards of 6 trillion in Iraq only war debt. So really we have 7-8 trillion in debt out there between just those two things, because we aren't making good choices.
Short answer: when you print money, borrowers and non investors lose money, while lenders and investors gain more. It creates more imbalance.
It is more complicated than that. If you print money, borrowers (e.g. 30 year mortgage) can win, because they get to pay back their debt with cheaper dollars. If you have credit card debt, you are probably in trouble. People who have saved, and invested (e.g. bonds) can lose, because their investments are devalued.
1. Get rid of the minimum wage. It makes as much sense as rent control... none.
2. Help out the needy by introducing a minimum income and/or an aggressive earned income tax credit.
3. Everyone knows kids are expensive. They shouldn't be. Scale 2 according to household size.
4. Set the levels of 2 high enough that citizens can pay their own taxes (both halves of the pension tax) and buy their own benefits (disability, health, life, 401k 'matching', etc.).
...watch the number of entry-level jobs explode and the demand for robotic work tank (like McD's filling sodas with robotics).
Side benefits:
A. Small companies will be better able to compete with big companies with employment lawyers and HR departments.
B. Bootstrapping and entrepreneurship becomes more viable.
C. Corporations lose some of their relative power due to A and B.
> watch the number of entry-level jobs explode and the demand for robotic work tank (like McD's filling sodas with robotics).
People have better things to do than repetitive, unfulfilling tasks (unless they enjoy it, of course). We need to get to the Star Trek utopia... what you're talking about sounds like halting progress.
Automation is coming. We can't stop it. Together with Globalization and various "free" trade agreements, the US worker is ..effed. We are going to have the well-paying STEM jobs, the lawyers, bankers, doctors, therapists, the super low wage unskilled laborers in a race to the bottom, trying to compete with machines, and a huge, empty nothing in the middle between those groups.
And that's going to happen sadly before we reach Star Trek utopia, and there will be large-scale civil unrest, even in the US, within the next 30 years, I'm betting on it.
And let's not even talk about impoverished countries with exploding populations that are already struggling to provide jobs - an endless cycle of regional warfare, an endless Arab Spring.
Work is almost over. Good riddance to it. Why shouldn't everyone benefit from the fruits of full automation?
> We are going to have ... the super low wage unskilled laborers in a race to the bottom, trying to compete with machines, and a huge, empty nothing in the middle between those groups... and there will be large-scale civil unrest, even in the US, within the next 30 years, I'm betting on it.
That is largely up to the people who now have all the money and power. If they are shortsighted enough to take entirely for themselves the wealth the machines create - rather than using it to guarantee basic security for everyone - then we're in for rough times. I'm betting with you on that one.
> Why shouldn't everyone benefit from the fruits of full automation?
They should, but:
>That is largely up to the people who now have all the money and power.
And that's why they won't. At least not until their poverty destabilizes the economy. It's expensive and reduces profits for the people making the decisions, at least in the short run.
Doctors, bankers and lawyers are screwed as well. ML will make sure of that. We will still need some people to perform those functions, but not nearly as many as we have now.
Yup, virtually everyone is screwed, eventually (with eventually being not that far away, IMO).
Something that seems to get missed a bunch when talking about the upcoming lack of work for humans is that a job category doesn't need to be fully automated to cause widespread lack of employment.
Simply automating a job enough to allow 2 people to do the work 3 used to do puts 33% of those doing that job out of work. 33% unemployment is already an economic nightmare and the actual ratios of "X people to do the work Y used to do" will quickly become much more severe than 2 to 3.
Some people will inevitably say "this has happened before", but this time a lot of the automation is going to be purely software. You are not going to have enough new jobs for people "maintaining the robots" at anywhere near the scale required to make up for the lost jobs like you did with the previous more mechanical style of automation.
Show me an AI that can beat the best human at Chess, and I'll show you one that can beat the best human at any game?
Your mistake is assuming that a sizable portion of the work these jobs involve can't be replaced by "dumb AI", which is what ML is all about, and that they require a fully general AGI.
I should have said, do these jobs more efficiently. Maybe I'm naive, but I don't see how a machine that does a "sizable portion" of the work would ever be good enough to be worth using. A human expert would always be needed to check the work.
If the proposition is that this would lead to fewer humans being needed for these jobs, I suppose that could be the case. In my own field, my criticism of automating, say, legal research and writing, is that the time it would take for me to check the work would be nearly the same as doing it myself. I don't see much efficiency gain, which is why I think the only thing that would truly be better than a human would be an AGI.
There won't be a sudden replacement that can do everything. It will be like gathering food. The majority of the population used to be involved with gathering food. Then people started to farm. Then instead of human powered ploughs they started to use horse powered ploughs. Then came the engine powered ploughs. Then came automatic seeding machines. Machines that can separate corn from the plants. Etc. Nowadays only a tiny fraction of the population is involved with food production. There are still farmers, but just a couple. We are now in the horse powered plough stage. We have full text search that can go through tons of documents that doctors and lawyers would previously have to search by hand. An assistant to do legal research is essentially just a really good full text search engine, it's a continuum from dumb search engine to smart search engine. We have email. We have electronic systems to keep track of patients and clients. Soon we will have systems that can suggest a diagnosis based on symptoms, and systems that can suggest medical tests to narrow down a list of diagnoses. Systems that can assist clients to write their own standard legal documents. It won't be that suddenly all doctors and lawyers are out of a job, it will be like farming. We still have farmers, but only a couple because they are so efficient.
Also, if you look at most of what's been automated away, there's very little what we would consider (and even what people 40 years ago would have considered) artificial intelligence involved.
If you look at the legal field, what's changed is the means of gathering and disseminating information. Legal researchers can be much more productive with computer searches, and consumers can get access to advice and forms in some cases without the need of direct face time with a lawyer.
Some of the changes weren't even primarily driven by technology at all, but by new ideas for business models. I think that something like legalzoom could have been done with the technology available decades ago (phones, mail, and catalogs).
Manny attorney jobs, especially entry level discovery and research, are being automated out of existence through increased productivity. You may be able to keep your job, but a lot of graduating attorneys in the next few years will not be able to find one.
I'm not convinced we really want the Star Trek utopia. A great many people have a need to feel useful. Some fulfill it with family, others with work. You don't have to look very far to find neighborhoods where people have enough food and medical care but don't have anything to do. These are not nice neighborhoods.
They aren't unnice neighborhoods because those living there have nothing to do. They're unnice neighborhoods because, while many of those living there do all they can, it isn't enough to make their lives worth living. So those who can't make their lives worth living make those who can have worse lives.
Disclaimer: I live in one of these neighborhoods. While I, personally, think we're closer to a post-scarcity society than we realize, I'm still surrounded by those who lack the privilege to think about such things. As such, they're kept awake at 2 AM because their neighbor is having a physiological reaction to whatever drugs he took that day and is storming around his complex, screaming and destroying things. Meanwhile, I'm a straight white male privileged enough to be living in a co-op, where we maintain a better standard of living and don't worry about such things on our property (at least, to some extent.)
Maybe, but I'm a lot more concerned with tax-dodging American companies incorporating in Ireland and skipping out on millions, than I am about safety nets that help people to get by. I don't think that unhappy neighborhoods are caused by people sitting around feeling terrible about mooching. Put another way, I hear a lot more people trying to figure out how to pay their bills, than I do people feeling bad that they need help to do so.
You may not remember from the Star Trek universe, but there were multiple world wars and huge amounts of suffering between "today" and what we remember fondly from the Star Trek universe. There was no "happy path" to the society portrayed in Star Trek.
How about people be allowed to choose for themselves what they do? I know plenty of people who would prefer to do repetitive, unfulfilling tasks and get paid for them versus sitting around broke and waiting for utopia to arrive.
> what you're talking about sounds like halting progress
Depends on what you mean by progress. Giving someone work experience is progress for her.
I'm not talking about halting progress. I'm talking dividing the employment and subsistence problems. There will still be demand for automation. It just won't be artificially inflated by making employment more expensive than it has to be.
"Giving someone work experience is progress for her."
Is it, though? If you spent 8 hours a day pouring soda in to cups would that be progress? We have this absurd fetishization of "work" as though any task performed in exchanged for money is inherently virtuous. Imagine a world where that person is given their wage, but a robot does the job for them. Is that world any worse off?
> If you spent 8 hours a day pouring soda in to cups would that be progress?
It's not exciting, but proving you can show up on time every day isn't nothing. There are plenty of great jobs that mostly involve being professional, congenial, and available. It's the work history equivalent of building a good credit rating.
This is an important point. Just being punctual and efficient and not stealing is a bar many people can't clear because they didn't start in a low paid job and get experience.
So artificially increasing the demand for automation is bad, but incentivizing people to have more children and artificially increasing the population is good?
> Giving someone work experience is progress for her.
Progress is getting to the point where people can have technology provide the essentials, so that these repetitive jobs are just for fun, rather than a means for survival. It's like in DS9 where Sisko's father runs a restaurant--for pleasure. If he'd been sick or no longer interested in working, he wouldn't have to worry about starving or finding a place to live.
I don't see how they're mutually exclusive. Automation frees people from menial work into higher level jobs that can produce even more automation.
What we currently have, though, is a poorly designed system which doesn't make this transition easy and doesn't reward actors properly. I'm talking about things like free training for programming and technical skills, conditional support for the unemployed so they can have time to re-train and re-insert in the job market (while maintaining their health and spending), and means to make income distribution little flatter (automation can concentrate income to a degree that gets counterproductive).
I want automation and technology to fuel progress, and provide for people so they can "spend" without the need for employment.
"Our infrastructure provides you with X to spend every time period. Spend on what you'd like. Earn more if you'd like with a job/tasks/work of your choosing."
His "solution" at the end was some thinly veiled communism. His proposed economy didn't even make sense. There was nothing stopping people from accumulating wealth and basically taking over.
It's not clear that there is any other solution besides something you could call "thinly veiled communism." Either everybody gets some ownership or share in the productive capacity we're increasingly turning over to machines, or some people just get left out not because they're unwilling to contribute but because there's no labor market left.
I guess here is one of the big problems with these solutions. Post scarcity is not even a thing. There will always be finite amounts of different resources or creations.
So even if we live in crazy robot utopia world people will be creating things that will still exist in finite amounts that they will trade for other objects that exist in finite amounts. In fact we really already do live in crazy robot utopia world and this is already happening. Almost no one is starving in america and millions of people live primarily on the dole. Those people living on the dole are living better than like 90% of the human race that has ever existed, they are just living relatively worse than the people who are employed or making a living.
In project australia or whatever it sounded like there were easy ways to consolidate resources because people still owned things and could barter them and eventually they would have all the resources and the monthly credit allowance would once again be welfare. I'm not even really sure what is wrong with capitalism as a system because life is getting better for everyone over time, and as long as ownership/monopoly isn't taken to its extreme things continue to work out.
5. Make sure you also deregulate construction and allow people to build shanty towns so they can work for $1 an hour and actually manage to somewhat survive in your dystopian nightmare.
The last thing any government should do is subsidize procreation. You get more of what you incentivize and if you want an even larger percentage of the population on welfare, go ahead and pay more minimum income for bad planning and failure to use birth control.
Because it doesn't matter? All of the data from minimum wage increases indicates that employers are not employee constrained, they are demand constrained.
So, minimum wages increases bump demand significantly while hurting employment weakly (if it all).
The problems with the suggestions here is #1 and #2 are both vigorously defended by different parties. So your proposal is a no-go politically. The Dems won't lower or get rid of minimum wage, and the earned income tax credit is already hated by the GOP (even though they proposed it). There is the additional problem of all the missing details as well.
Now before anyone trots out the whole "well if politics werent so stupid..." I have to stop you there. You reform with the politics you have, not the politics you want.
> and the earned income tax credit is already hated by the GOP
They hate writing checks just to write checks.
You can get it passed if you sell it as a progressive subsistence voucher that will replace the minimum wage, medicaid (we still have an insurance mandate), food stamps, etc.
In fact, use the word voucher. The GOP loves those.
...and the GOP is more complex than people understand. I voted for Romney and McCain and I'd go for an EITC if it came with the right reform package. All this "if it weren't for those guys..." is really counterproductive.
Overall I thing the GOP has a great message, but they don't follow through.
Over the last 30 years the GOP has raised government spending far more than the Dems. Consider the Medicare prescription drug plan without any negotiation for lower rates.
It's just redicusly over the top levels of corruption.
>Overall I thing the GOP has a great message, but they don't follow through.
Can you name a political party, in any part of the world, in the last century that did follow through with their "great message"?
Politicians are PR / sales people. The product work is rarely actually done by them.
If mortgage interest rates on average went up, the politicians will blame the greed of banks, the international exchanges market, the gravity was higher than normal etc.
If mortgage interest rates on average went down, then that's a great reason to vote that politician in for another term!
UK Labour Party elected in 1945 removing Churchill from office - they founded the NHS.
People who had suffered through WW2 wanted to feel that there would be some benefit to the common people - 70 years later and the NHS is still one of the most loved institutions in the UK despite being avowedly a socialist endeavour.
NB I am not a supporter of the current Labour Party (AKA "New Labour") but they do deserve a lot of credit for what they did back then.
Excuse me, but I think much of what you've written fails to actually address the question you asked. The reason hiring people is expensive is largely because of the regressive (ie: not scaling with the wage) taxes and insurance premiums. Those are why any given employee costs something like 40% on top of their actual pay to their employer.
And by and large, much of what's "bought" with those fees and taxes just doesn't fucking work. Pension taxes can either go up for low-wage workers (precisely where they impact low-wage employers more) xor they can stop topping out for well-off professionals (and instead scale linearly or progressively with income). Health, life, and disability insurance should be consolidated into a more efficient public system. Company-provided 401k's are often basically just a handout to mutual-fund companies (that is, the fees take away from contributions but the investments don't perform better than a random walk). We can switch people over to firm-independent IRAs or some other supplementary pension system to increase efficiency, and give the gains back to workers as pay rises.
Also, getting rid of the minimum wage - or any other measure designed to decrease mechanization and increase the usage of low-wage, low-skill labor - is exactly the opposite of what should happen. Public policy should never be written to deliberately hamper productivity growth in the name of increasing human toil!
> Public policy should never be written to deliberately hamper productivity growth in the name of increasing human toil!
Depends on what you mean by productivity. Taken as a whole, people are working less and less.
> And by and large, much of what's "bought" with those fees and taxes just doesn't fucking work.
I disagree, but regardless, tying benefits to employment is silly and counterproductive. How many people make major employment decisions based on availability of benefits. I think there's common ground in thinking that employer-provided benefits is a broken idea.
I also think there's way to provide for the needy while letting individuals make their own decisions. Health insurance is already regulated and individually mandated.
>Depends on what you mean by productivity. Taken as a whole, people are working less and less.
Productivity is well-defined: output per unit of input. Labor is only one input, but since it's the most common, productivity-per-hour is one of the most measured forms of productivity.
If we assume that wages and productivity are correlated, then while reducing wage floors sounds like a good idea, what actually happens is that we're encouraging employers to use low-skill, low-output-per-hour labor in place of machines that have a higher output-per-hour but a higher up-front cost and no ability to externalize maintenance expenses (ie: between the cost of keeping a machine repaired or a worker fed and housed, we currently allow employers to externalize the latter but not the former).
This is why low wages are a bad idea: they reduce the total output of the economy, but make up the loss by externalizing it onto workers (who then have to take Food Stamps to stay alive because their job isn't productive enough to provide them a living). It means we end up using losses to the total economy to subsidize exploitative and unpleasant working conditions, throwing good money after bad.
> If we assume that wages and productivity are correlated, then while reducing wage floors sounds like a good idea, what actually happens is that we're encouraging employers to use low-skill, low-output-per-hour labor in place of machines that have a higher output-per-hour but a higher up-front cost and no ability to externalize maintenance expenses (ie: between the cost of keeping a machine repaired or a worker fed and housed, we currently allow employers to externalize the latter but not the former).
Humans aren't capital that is produced to industrial demand; if humans aren't employed productively, they still need to be fed and housed (or, alternatively, the externalities associated with their not being fed and housed must be accepted.)
So its somewhat inaccurate to say that we allow employers to externalize those costs, as they are cost that exist independent of the decision of employers to use labor, and which low wage payments, while not completely offsetting, mitigate somewhat.
If industrial machines were produced independently of industrial demand and produced negative externalities if they weren't maintained whether or not they were productively employed, then it would make sense address them differently with policy than we do now, too.
GDP is Gross Domestic Product, a measure of productivity. Every employed worker could be more productive while the U.S. loses productivity as a nation.
Finding ways to get more people producing useful things is what we need to think about. I was suggesting that we should reduce the cost of providing entry-level employment. This will make it cheaper for employers to hire the under-employed, under-educated, and mis-trained. At some point, the under-educated workers will become experienced workers, and likely more productive (in the individual sense) than the equivalent unemployed worker.
> GDP is Gross Domestic Product, a measure of productivity.
Product(ion) is not productivity. Productivity is product/(some input measure) -- laborers and laborer-hours are common input measures when measuring labor productivity, though there are other less common kinds of productivity one might measure.
Definitions are boringly pedantic and beside the point. I'm saying the bigger issue is the lack of output on a national level due to undertraining, underemployment, etc.
I'd like to point out that my assertion that has been basically ignored in favor of less interesting semantic arguments.
>Definitions are boringly pedantic and beside the point. I'm saying the bigger issue is the lack of output on a national level due to undertraining, underemployment, etc.
Come on. You were wrong, the difference between production and productivity is very important. You can't just cop out and whine that 'definitions are pedantic'. No. Definitions are very important.
> 1. Get rid of the minimum wage. It makes as much sense as rent control... none.
This would only work if we got rid of welfare. Otherwise we are just going to create more government subsidized jobs.
> 4. Set the levels of 2 high enough that citizens can pay their own taxes (both halves of the pension tax) and buy their own benefits (disability, health, life, 401k 'matching', etc.).
...watch the number of entry-level jobs explode and the demand for robotic work tank (like McD's filling sodas with robotics).
I wouldn't call those entry level jobs. There is very little opportunity to grow beyond the entranceway. Why would we want to waste human minds on things robots can do. Robots are our friends. If we had enough in your #2 and taxes covered taking care of people's basic needs, selling of people's precious life wouldn't make the robotics takeover of the menial (and beyond) all that scary.
> There is very little opportunity to grow beyond the entranceway.
That was just an example. Nobody would show up to flip burgers for $0.25 an hour unless they saw a longer-term payoff down the road.
They might take a job doing menial work for little-to-nothing while they learn the ins and outs of a business and eventually apply for a more substantive role. We could call them 'apprentices'.
There's no wage too low that _someone_ won't take it. The only limits we have are minimum wage and public assistance. Without those, if employers offered $0.10/hr, people would be still lined for blocks to take the job when the alternative is nothing.
Longer-term payoff is meaningless when you can't meet your short-term goal of eating.
eh... I never flipped burgers and I got a good job. There are more ways to demonstrate worth than simply being present and wasting your time. It's more important to open useful doors to people than it is to make them do robotic work for no reason.
I feel like your view is the sort of a "paying your dues" view, but the people I know that take off quick find something substantive to do, learn a lot very quickly, and are off doing something better in rapid iterative succession. The strategy you're advocating sounds like a very long runway before takeoff.
> The strategy you're advocating sounds like a very long runway before takeoff.
It's on-the-job training. Whether it happens quickly depends on the industry.
And the current employment problem doesn't revolve about well spoken people who regularly read tech blogs. The unemployed are disproportionately young, make, and under-educated. I'm saying a feasible way to get the retrained is to make it easier for them to find an occupation in booming industries.
We need to get the point where employers can think, "Why not? Let's give him a shot and ramp up his salary if he's any good." when an unproven young guy applies for a job. Right now, that doesn't make any sense because hiring him is too expensive. So you get situations where they give fewer hours to avoid providing expensive benefits, etc.
I think you do have something there, but that only works if the manager has discretion to do so. For instance, at a mom & pop shop that's clearly possible. However, if wages are pegged by HQ and there aren't slots to move someone up, this sounds like a waste of time. The employee is only getting the pay and time spent flipping burgers out of it.
If you look at inflation adjusted after tax income, it looks more like income is stagnant for the bottom 50%, not 90%. There are some great graphs in this New York Times article about the stagnation of the US middle class.
With stagnant incomes? Very easy - non-wage compensation.
Instead of giving people money, you give them non-wage compensation (e.g., health care benefits rather than wages, and similar things). That's exactly what happened, in fact - wages are "stagnant", but compensation per hour is not.
Could you please provide a citation for the claims that food and housing prices are going up? I looked, but could only find information to the contrary on food (especially as a proportion of household spending), and very short term, noisy, and confusing information on housing (not house prices, but housing).[1]
The parent was speaking to US nationwide policies and conditions, so nationwide US data would be most relevant, but I would appreciate any illuminating data, as it appears very hard to support the points I initially responded to.
>Aside from these core issues, I'd also speculate that a tremendous quantity of money is trapped in financial instruments. If it's in a financial instrument, it isn't exactly employing people or building goods or creating demand for goods. The same could be said about the billions of dollars held close to the chest by the oligarchy.
We can further unpack the huge amounts of money trapped in financial instruments. There are really two functions for financial instruments: investment in productivity growth, and rent extraction. The pool of capital for private-sector productivity growth is glutted; in fact, it's being held back by stagnant consumer demand and high rents.
So beyond stagnant consumer demand, we've got a lot of rent-extraction (asset and real-estate bubbles being created to extract resource, information, and land rents as debt-service or legal expenses) and a major dearth of productive public-goods investment (public health (ie: vaccination and disease prevention), infrastructure, education, etc.) loading down the economy with dead-weight losses.
(We can also simplify our model by construing capital/labor bargaining as capital owners extracting a rent from laborers for usage of their capital, ie: money, machines, land, etc.)
>There's a huge opportunity here to have a government public works program or some other major initiative to mobilize the underclasses, but it won't be taken.
The basic problem is that many, possibly even most, of the rent-extractors adding dead weight to the economy are using their wealth to buy themselves government policies favorable to rent extraction rather than wealth creation and distribution, ie: further neoliberalism.
Let's be frank: an economy in which the workers are healthier and more educated, the work is more mechanized, and collective problems (like transit, urban development, and disease control) are handled collectively is more productive! It outputs more stuff! So you don't have to be a socialist like me to realize that reducing the net output of the economy to enrich a few people at the top is a bad idea!
You just have to use accounting metrics that don't count increased rents as growth.
> Aside from these core issues, I'd also speculate that a tremendous quantity of money is trapped in financial instruments.
Wasn't one of the lessons of the downturn that companies weren't keeping enough cash on hand to meet the demands of their financial shenanigans? Isn't that the point of the stress tests? Everyone can't just hedge ad infinitum. At some point, someone has to have the cash to pay the bills.
Sure, there's more cash on hand than in 2007, but how is that not healthy? What is a healthy level of cash?
You're correct. Keeping cash on hand and paying down debt is healthy. A high savings rate encourages investment, which encourages productivity increases, which increases quality of life.
It's hard to think clearly against the blizzard of noise which says savings are bad, consumer spending is good and economies only grow when everyone is in debt. But the opposite of all these things is true, you've just got to ignore all the talking heads that want you out of your house and wasting your saving on consumer trash.
If 'trapped in financial instruments' includes standard investments, like deposited in a bank, loaned to a business, or buying equity in a business, then your money is not trapped at all but spreading through the economy in multiples. Only stuffed-in-a-mattress style 'instruments' are taking the money out of circulation, like buying an expensive piece of art or a condo that you don't rent or live in. Yet, you still paid someone for that art, so the cash is flowing...
You're leading with a consumption=everything view on the economy. This is wrong.
Growth and employment comes with investment in increasing productivity, not from consumer spending.
I would read some books that take an opposite view to Keynes. Things will make more sense after absorbing the fact that consumption is not the source if economic growth, production and investment is.
I'm surprised that a comment that started with "I'm no economist" and proceeds to claim a great many things without sources did so well on Hacker News. I wonder how well a comment like "I'm no computer scientist, but why can't we have consistency, availability AND partition tolerance" would have done.
You talk mainly about consumption, but GDP (the subject of this article) is a measure of production (gross domestic PRODUCT) not of consumption.
Sure, these things are related, but the article is correct to point out things like exports and capital investment.
If the US were producing more, even if all of the additional product were to be exported, GDP would be higher.
Any problem with GDP (or growth in GDP) is related to value-creating economic activity.
Yes, if the government were to spend (invest?) money in public works, GDP would rise, regardless of the output of the works. There would be secondary effects, too, as some of the money earned would be spent on locally-produced goods/services like lattes and haircuts.
The point is that production is a derivative of consumption. Consumption doesn't adapt to production. So, if you want production to rise, you have to work on the consumption side of things.
That is something economists have major disagreements about. Classical economists (see Say's law) would argue that the production of a product creates the market/demand for it.
It's an interesting debate, and the position I find convincing is that Say's law usually holds... except (rarely) when it does not, such as in the recent financial crisis. Believing that it always holds automatically is a fallacy of Classical economics.
It's interesting that Jean-Baptiste Say himself was willing to learn from history.
That's obviously false as plenty of goods are never sold but destroyed instead because nobody wanted them. Production follows demand, any businessman will tell you. Maybe if a few economists actually learned about business we wouldn't have so many recessions.
A rise in production doesn't have to coincide with a rise in consumption. The additional production could be driven by increases in investment or in net exports.
So the core question is, if unemployment is high and wages are low, why not invest?
You promote investment by the government later in your post. Yet is it the case that all possible private investments will have low rates of return, and only government investment can possibly have a high rate of return? If so, why?
(Note that I have no particular objection whatsoever to having the government end welfare/unemployment/etc, and simply provide low wage employment for anyone who wants it building public works of various sorts. But my reasons for supporting this are simply because I favor creating disincentives for idleness, not because I think only the government can engage in productive investment.)
An aside (not necessarily aimed at you): why is taken for granted that the poor must be motivated via the stick (reducing benefits), while in contrast the rich are motivated by carrots (by reducing the top level of income tax, wealth taxes, etc.)?
Surely if we tax the rich more, they'll have an incentive to work harder to make up the shortfall?
Similarly, if we reduce taxes on the poor, they'll be motivated to work more as they'll be keeping more of what they earn (especially when we consider the much greater marginal value that extra dollars have to them).
In all cases, I favor increasing dUtility/dWork. Currently the utility gains to the poor from increasing work are nearly flat, and often negative. Note the graph in this post, illustrating the disposable income gains both with and without transfers:
Replacing welfare with work would increase this, since incomes would go down without work. In contrast, taxing anyone (rich or poor) would decrease dUtility/dWork. Unconditional wealth transfers also decrease dUtility/dWork due to diminishing marginal gains.
> Note that I have no particular objection whatsoever to having the government end welfare/unemployment/etc, and simply provide low wage employment for anyone who wants it building public works of various sorts. But my reasons for supporting this are simply because I favor creating disincentives for idleness, not because I think only the government can engage in productive investment.
I think we argued about this before. Why do you hate people who choose to spend time as they wish instead of being coerced into unwanted employment? The only thing massive unwanted public infrastructure projects are good for is ruining the environment. Public works policy in Japan is a great example of top quality bridges to nowhere and concrete ditches that no one cares about that also happen to do nothing "for the economy": http://www.nytimes.com/2013/12/09/business/international/a-b...
Why not invest the money into things that actually produce results: education and fundamental research? Let's figure out how to get robots to meet our material needs so we can spend more time not working.
>Why do you hate people who choose to spend time as they wish instead of being coerced into unwanted employment?
Why should money be taken from my paycheck to support idle people who could be working? In general it's none of my business how people choose to spend their time, but if they expect me to pay their expenses it becomes my business and I have to ask why they can't go to work like I do.
> Why should money be taken from my paycheck to support idle people who could be working? In general it's none of my business how people choose to spend their time, but if they expect me to pay their expenses it becomes my business and I have to ask why they can't go to work like I do.
It's not the same. People drawing pensions are simply collecting on a benefit they earned earlier in life. In the US, anyway, if you don't pay in to the pension system when you're working you don't get a pension. Also, the exact amount of your check depends on what you paid in.
The government take 8% or so of my paycheck every pay cycle, and when I retire I'll collect a pension because I paid for it.
That's a whole different world than paying someone because they don't want to work.
> The government take 8% or so of my paycheck every pay cycle, and when I retire I'll collect a pension because I paid for it.
You are actually paying for the pensions of current retirees. The expectation for almost all pension schemes is that future taxes will fund your retirement. That's the issue behind the Social Security shortfall and the dramatic cuts in retirement benefits as part of austerity measures post-Great Recession in EU member countries.
> That's a whole different world than paying someone because they don't want to work.
By definition retirees are people who could still be working but choose not to. How about the disabled and the infirm? Those between jobs?
The real issue you seem to have is the "I paid for it" part. Where in the economic cycle is this money extracted? Would you feel better if it came from taxes on corporate revenue? Out of sales tax on luxury yachts?
The issue has been framed by trickle down ideologues as "this money comes from your paycheck!" What is the logic behind getting rid of anything that looks like income guarantees when it comes to you as a worker as opposed to an owner of a business?
>You are actually paying for the pensions of current retirees.
Yes, everyone understands that. But it incurs a debt I will expect to be repaid.
>By definition retirees are people who could still be working but choose not to.
Absolutely. If they paid into the pension system they should be getting a pension. If not they need to rely on their savings.
>How about the disabled and the infirm? Those between jobs?
You're changing the question a bit here. We were talking about people who can work but don't.
>The real issue you seem to have is the "I paid for it" part.
I don't see why you think this is an issue. The money comes out of my paycheck. It's money that I could certainly have saved or used for some other purpose.
I don't think it's unreasonable to expect people to provide for themselves and their families. And I don't mind helping people who can't do so for reasons beyond their control. But I have no interest in supporting people who don't want to work. I don't want to work either, but I drag my ass out of bed every morning, and I don't appreciate other people helping themselves to the fruits of my labor.
Step 1: Eliminate disincentives to work.
Step 2: More people produce things of value.
Step 3: We have more things of value that can be distributed.
Do you believe that there is no additional productive labor to be done? I.e., it would be completely useless to build more community gardens, fix our "crumbling infrastructure" or provide free daycare for working mothers? (I'm being naughty, by stealing common left wing tropes as examples of things the idle could produce.)
You can do those things I guess. But folks don't want to pay for them. In the end its an efficient market, right?
Clearly we'd all increase our standard of living if folks created more. Its just an equation involving what people are willing to do vs what folks with money will pay. Labor-intensive things have pretty much been priced out of a market. And our service economy means everything involves labor.
Imagine McD's and friends automate the whole store. What do those millions working there for minimum wage do then? Gardening, daycare etc don't pay even that well.
Back up. Currently we pay people to produce nothing. There exist things with positive value. So why not just have the people producing nothing produce those things instead? We can just make it a condition of receiving pay.
My mind meta-boils your question down to: "can't I demand some results from the way my taxes are invested?"
Is what we're discussing, floating the jobless/low earner-producer, 'investment' at all?
I'd personally like to understand the doublethink and mental laziness that led sedachv to make that passive-aggressive rhetorical crack about yummyfajitas hating all the poor souls who choose not to work.
The hard questions regarding govt spending for me are:
* Is it healthy (societally, fiscally, spiritually) long term to consider government to be the charity that can only grow - the ultimate backstop for all bad things that can happen to its people? A charity with unquestionable power to implement its shifting, sometimes controversial/immoral/amoral, agenda?
* Is it okay for the government to prioritize everything and therefore have no priorities at all? Should infrastructure be prioritized over military? What's the proper role of federal involvement in local schools? Should we cap or continue the folly of "non-discretionary" funding of entitlements that dwarf and crowd out all other federal spending? Ultimately, our allowing perpetual deficit spending is what makes this priorities-free dream that we are all living in possible.
* how much of a service delivery role should government have given its track record? The perennial VA healthcare debacles spring to mind. And the raided soc security trust fund that should have been invested and grown, but has been busted since Johnson. Student loans and the skyrocketing college tuitions. Unintended consequences! At least [my favorite congresscritter] meant well.
It fascinates me how smart people whose arguments in favor of government as 'the answer' to X can instantly shift their argument for X from a learned basis like statistical evidence/quoting an expert to a faith-driven, eye-squinting, chasm-leaping abstraction, or worse, emotional outbursts (frequently rude) - and sometimes ALL IN THE SAME BREATH.
I find such people, like sedachv, troublesome and no fun at parties. We might be doomed.
>I'd personally like to understand the doublethink and mental laziness that led sedachv to make that passive-aggressive rhetorical crack about yummyfajitas hating all the poor souls who choose not to work.
I'm still trying to wrap my mind around logic that assumes people who don't work by choice are entitled to the results of my efforts and yet have the gall to paint me as selfish for protesting.
This idea of "hate" is silly, as is "coerced". I simply propose that if we are paying people who claim to be unable to find a job, we might as well get some productive labor out of them.
If you believe that there is no productive labor that the government can perform, that's fine - I guess you oppose all new spending?
> There's a huge opportunity here to have a government public works program or some other major initiative to mobilize the underclasses, but it won't be taken.
agreed. but it won't happen. they clearly do not want to. you know what I mean when I say "they". I think what "they" are doing is instead now letting the USA enter a phase of milking and rundown. The truly rich, the truly powerful, already have homes anywhere they want to in the world. Whether that's in western/northern Europe, or modern Asia, or in a micro-nation. It is in those places and nations where they are ensuring they have the government investment and infrastructure to ensure a quality way of life. They -- you know who I mean -- have already marked USA as 'deprecated' and moved on, psychologically, at least medium/long term.
People love to predict the downfall of the US, even if their only proof is a single bad quarter. The reality is the US is still too big of a portion of the world economy. Eventually things will even out but that day is not near.
There is no such thing as wealth-building financial instruments. You may be better off by cashing in some interests or dividends but someone else will lose the same amount of money. And it probably won't be someone rich who doesn't have to care much.
I think the first thing is to ensure that you understand how trade can produce net value increases for all involved parties: http://en.wikipedia.org/wiki/Comparative_advantage. It's not a big jump to see how at least some financial instruments can be wealth-building.
I have to disagree. Money does not create value, work does, and therefore investing money can not create any value on its own. You can of course invest money that is in turn used to enable the creation of value by work, for example by buying machines that are required for the work, but once the investment has been payed back any additional returns on this investment are just taking away a share of the value created by the work which rightfully belongs to the workers doing the work. Money can catalyze the creation of value but it does not create value on its own.
This reminds me of arguments that money must be on the gold standard to have value. Any theory that doesn't explain observed reality is not a theory, and it is definitely observed reality that the concept of value has no strict ties to work.
So if it is not (only) the amount of work that makes up the value of goods or services, what (else) is it? And I am neither interested in the supply and demand situation which may cause the price to deviate from the value, nor in the use value.
The labor theory of value is a mistake with roots in both Adam Smith and Karl Marx. The Austrian school of economics explained and demonstrated how it is utterly wrong, and they have presented a much better theory. Look up (and read) Carl Menger.
George Reisman has developed a brilliant, modern presentation that dismantles the problems with the labor theory of value, and the related exploitation theories. [1]
I read the essay but only once so far, so I may have missed some things. It doesn't seem to point out any flaw in the theory but rather try to present an alternative. But this alternative I find utterly unconvincing because it is full of errors and holes. I would really like to provide critique to all those points but that would become a piece longer than the essay. If you like I will elaborate on specific points.
Picking winners and loser successfully is as valuable as appraising houses. Without people investing, growth will only follow established wealth (you have to save up to start a business or buy a house). We would be moving from a crowd-sourced pricing model to an "expert" (assuming people with disposable wealth are experts) pricing model.
I am not arguing against investing and its usefulness to catalyze the creation of value, I am arguing that investments don't magically create value but only the work they support or enable.
But if I go a step further I would also argue that investments as we know them are not sustainable. There is a risk that an investment fails and therefore interests are chosen such that they yield a profit at least in the long run and this also doubles as incentive to invest in the first place.
I now argue that this setup will run away. Having money to invest now allows to gain more money and then even more money by reinvesting again and again. But because investing is a non-productive activity not creating value the returns must be paid by taking an ever increasing share of the value produced by the workers.
The problem is that the value produced by work at best increases linearly with time (assuming a constant workforce) while the returns from investments increases exponentially. And no matter how close to zero the gains of an investment are, sooner or later it will blow up.
> I am arguing that investments don't magically create value but only the work they support or enable.
Well, that's true in a sense, but discovering new information is valuable. I'm just saying that figuring out which work to support or enable is itself valuable.
I agree, though, that the U.S. undervalues making actual stuff with long term benefits. Ask kids what they want to be when they grow up. How many list jobs in manufacturing, inventing, research, mining, engineering, energy, etc.? Mostly they pick fine careers, but mainly service-heavy careers with low multipliers: teachers, fire fighters, police officers, athletes, entertainers, doctors, etc.
Financial markets are a way to sell and buy information, the arrangement of a productive forces in the economy. Profit is the result of selling information - arranging productive forces - that increased output. Loss results from decrease.
The difference between a human and a ~80kg pile of basic elements is their arrangement. So unless the two are equivalent to you, you can't claim the arrangement has no value.
So no, nobody is losing. On the contrary, individual profit is only a fraction of the added value to the economy, because the counterparty is doing the exact same thing. Every voluntary trade is done in expectation of profit by both sides. When on average that expectation is more right than wrong, economy grows.
lets say I have $50k saved. I can buy a bar of gold and bury it in my backyard - producing exactly nothing for anybody.
Or I can buy solar panels for the elementary school down the street and have them pay me 90% of their prior electric bill. The elementary school has a lower electric bill every month and I have a steady income stream and no one does any work.
Someone - probably the taxpayer - is working and giving a share of what he earns to the school's budget which in turn forwards a share to you.
And by the way, when you buy your bar of gold you pay some guys to dig some gold out of the earth and melt it into a nice bar. However I am not sure how the value and the price of a bar of gold compare.
Paying down hundreds of billions in debt. Finally a good call by US households on debt. Most major economies are seeing household debt rapidly increase.
It was expected that the gasoline cost savings would bolster the US economy via consumer spending, as an off-set against industry job losses and loss of capital investment. That hasn't happened, instead consumers are saving that money (quarterly net savings jumped significantly). What you get from that combination is an economic contraction.
I often read how household spending being down is bad, but why is that? Do we need so much stuff? If my wife and I have a one bedroom apartment, ride a bicycle and a scooter to get around, and generally lead a relatively simple life does that make the world a worse place? We do spend money, but it usually goes towards plane tickets to interesting places and going out for a pint or two - things we both enjoy.
I just don't see what's wrong with not buying more crap. Our parents have giant houses, multiple cars, hot tubs, and all sorts of stuff, and that's great for them, but it gets old hearing that our lifestyle is bad for America.
That is not what this is about. More spending doesn't necessarily mean more consumer spending and less saving.
Yes you can increase aggregate spending through consumer goods spending, but you can also increase spending and aggregate demand by having people buy more investments. You can spend and save at the same time. There are many ways to spend and save at the same time. You can buy something you are only going to need later, you can buy stocks in a business that will use the money to buy equipment and employ people, you can lend to a business that will buy equipment and employ people. This is all the economic equivalent of investing, the I in the GDP equation C+I+G+(X-M)
The only thing you need to prevent is people and organisations sitting on idle cash or cash like investments. That's what destroys the economy. Anyways fiat is a fictitious form of saving on the aggregate. It doesn't produce anything and people accumulating it doesn't increase the amount of stuff they will be able to buy in the future on the whole.
The point is to move the economy away from idle fiat and into consumption or investment.
>The only thing you need to prevent is people and organisations sitting on idle cash or cash like investments. That's what destroys the economy.
Not true. Cash kept in banks is reinvested in the economy. If companies like Apple keep billions in the bank, it has the effect of lowering interest rates and therefore encouraging investment.
Clarity in economic thought comes when this incorrect bit of Keynesian relic thinking is discarded.
It's bad for MACROeconomics. A consumer based economy suffers when consumer spending is down. More saving and less spending may be good for the individual, but it's bad for the economy. It results in lower sales volumes for business, less lending for banks, and an over all "liquidity trap" where increases in cash simply go into investments which don't stimulate the economy. Over a long enough time period, this leads to deflation, which believe it or not is actually MUCH WORSE than inflation as it can be near impossible to recover from (see the great depression for examples).
You need to go one step further and ask WHO is it bad for. Is it good for us as individuals to spend less, save more, and live a generally less materialistic lifestyle? Arguably yes. Is it bad for the economy as a whole when all consumers act this way? That's a different question :)
Even after all of this quantitative easing ? Makes me wonder what will happen once it's stopped.
EDIT:
I'm also talkin about the extremely low interest rates or basically ZIRP. There's really not much more the FED can do. But if this means that the era of zero interest rates is here to stay for longer then the party in Silicon valley is about to get even wilder.
I'd like the opinion of some people more knowledgeable about economics as to why recovery is taking so long. It's already 7 years since the crash. How long could it potentially take ?
It's not like this state of affairs can last forever can it?
Secular stagnation. Basically, what happened to Japan in the previous decades is now going to happen to much of the developed world. A prolonged period of no growth with no monetary policy tools to help solve the problem, and no political will to implement a more active fiscal policy.
Pretty much. Its not possible to recover from in the near term because the only reason it hasn't been worse is the fact we've been having the FED use every policy tool it could think of.
Perhaps its time we admit that growth isn't a requirement to an ever-incrasing quality of life? And investigate the transition to steady state economies?
But no growth will make inequality much harder to digest. Noone minds inequality as much , as long as he is assured that his lot will improve some day.
Take that away and it's only a matter of time before things boil over.
It's hard to make a case for or against economic growth, when all the economic growth of the past 30 years has been shoveled into the gaping maw of the ruling class.
That said, I don't want a steady-state economy - not in the long term anyway (i.e. thousands of years). We should not exhaust our resources on Earth, of course, and could do a much better job there, but eventually our species should come to harness the power of galaxies, and that will require economic expansion.
"India’s output growth accelerated to 7.5% last quarter, putting it ahead of China as the world’s fastest-growing large economy."
To be fair, some of the data presented is faked, but it's in the ballpark. It'd be good if India and the developing world were all growing faster, but they're still coming along at a nice clip.
I do have to ask: who says there's no political will? Japan is unusual in having an extremely stagnant, consensus-based, establishment politics. In the Western world, labor movements against the current establishment have been gaining steam and local victories like they haven't done in decades.
If political will stands in the way of getting out of the stagnation, it will be moved or removed.
There is no political will in the sense that people in power don't have the will, and the people with will don't have power. I'm all for optimism, but I doubt we're going to see a sudden reversal of the oligarchy and power restored to the people anytime soon. I support labor movements, but I doubt they can supplant the lobbying of the corporations.
If there will be any change at all, it will come about when corporate leaders put pressure on the government.
He does have a point, though: Japan is probably (and hopefully) an anomaly in how they dealt with the crisis. It's one of the last places on Earth where Confucian ethics still hold a great deal of sway at all levels of society (for now, at least). And that ideology has its strong points, but it is hardly compatible with democracy.
It is probably not a good example for how most of the West will deal with the same problem, though whether we do a better job of it remains to be seen.
> one guest left a New York restaurant with the impression Bernanke, 60, does not expect the federal funds rate, the Fed's main benchmark interest rate, to rise back to its long-term average of around 4 percent in Bernanke's lifetime, one source who had spoken to the guest said.
The endpoint of low-interest driven inflation by central banks is always a disaster. How long it takes to cure merely depends on how long it takes to end central banking and its arbitrary powers. Whatever capital was destroyed through government waste and general consumption will take time to rebuild. The sooner we're free from the scourge of central banking, the sooner we can all re-start growing and thriving.
The stock market? Securities are not consumer goods, why should they be counted in an inflation metric?
Food (and energy) prices are well known to be very volatile due to yearly changing weather and whatnot, and that signifies very little for economic policy; that is why there's a "core inflation".
If you don't trust the obviously fake data the evil government publishes, why do you link to a data series sourced from the US Department of Agriculture?
There's the MIT's Billion Prices Project, which is generated in some way from prices in online shops (but MIT is a private university, so we can assume it's not part of the government conspiracy). It usually tracks the official CPI data fairly closely, but sometimes it shows a slightly higher or lower number.
But anyway, if you look at how the Fed has expanded the monetary base by 300% since 2008, how come that all this "money printing" doesn't lead to much higher inflation? Isn't that quite amazing?
Corporate profits plunged by $125B, how can the WSJ spin that as "U.S. corporate profits rebounded in the first quarter of the year."? From the actual press release:
"Profits from current production (corporate profits with inventory valuation adjustment (IVA) and
capital consumption adjustment (CCAdj)) decreased $125.5 billion in the first quarter, compared with a
decrease of $30.4 billion in the fourth.
Profits of domestic financial corporations decreased $2.6 billion in the first quarter, compared with a decrease of $12.5 billion in the fourth. Profits of domestic nonfinancial corporations decreased $100.4 billion, in contrast to an increase of $18.1 billion. The rest-of-the-world component of profits decreased $22.4 billion, compared with a decrease of $36.1 billion. This measure is calculated as the difference between receipts from the rest of the world and payments to the rest of the world. In the first quarter, receipts decreased $28.9 billion, and payments decreased $6.5 billion."
I agree that the WSJ statement is very misleading, but I believe they meant it in comparison to Q1 2014, not in comparison to Q4 2014.
From the WSJ article:
"Profits [...] advanced 3.1% in the first quarter of 2015 from the fourth quarter of 2014, after falling 3% in the prior period. "
It's quite fair, year over year is a very normal and usual way of measuring growth. (it helps in that it gets rid of seasonal variations for one, but this is a very minor reason to use it.)
It's funny to see everybody overreacting and coming up with a bunch of theories. As a reminder, it happened much much worse last year (-2.9% http://www.forbes.com/sites/samanthasharf/2014/06/25/u-s-gdp...) and was immediately corrected the quarter after (+4.5%). It's called harsh winters...
While it is a good exercise, much of the commentary on this thread is conjecture. Attempting to explain why the GDP shrank last quarter is similar to explaining why the weather in your city was cooler over the last few weeks.
Still, I would much rather read conjecture here than in a business news article :)
Rather than put forth any definitive theories, usually what I try do is understand some of the top drivers of a change, and then, with those in mind, think about what the secondary effects might be.
This GDP report also confirms global trade is crashing, as net trade (exports less imports) subtracted -1.9% from the final GDP print, likely due to the strong dollar:
All the indicators point to NIRP coming to the US soon, as lately bad economic data (such as global trade) correlates almost perfectly with bond yields.
And as noted on ZH, the lower bond yields drop, the larger the secular decline in aggregate demand ("deflation"), the more businesses focus on investing in short-term capital gains instead of long-term growth projects (i.e. capex), the worse global trade will get, leading to even more debt monetization, even lower yields and even lower trade...
No surprise here. @cryoshon has it right in that the debt load is freezing the system. The banks failed in 2008 because we reached the limit of how much debt the world can support (not counting all the fake debt those crooks sold in the form of derivatives). The US gave the banks a ton of money to stay afloat, but it didn't solve the debt problem ie. the debt didn't get forgiven. What's interesting about this year is that criminal proceeding are finally moving against the leaders of the banks that survived the 2008 crash. These things take awhile to work their way along. This will not do anything to help the economy, in fact it will only get worse as the banks circle their wagons and stop lending.
Maybe the trickle down economics does not work, and we should tax the corporations more (like it used to be) and lift the tax on the lower wage workers? Maybe. The problem is that both parties are in the pocket of the big corporations and the average voter has less influence what is going down than ever. Related study:
Another huge problem that has occured for the past 6+ years is the low interest rates which has led to the lowest saving rates in decades. With talk of negative interests the savings problem becomes even more dire. Whats the point in keeping any cash on you when its losing purchasing power every second it's in your wallet? Consumption is not problem. We need real wages to rise and we need investment in things like infrastructure.
DJIA is at all times, Nasdaq is like it is 2000 again, a Republican is to be elected (giving how we like franchises it will be Bush 3 winning, unfortunately, over Clinton 2),... lets call it a "correction" that we're just due in for.
Another problem, the financial sector is hooked on low interests rates. The Fed was planning to raise interest rates this September but with these terrible numbers there is no way that is going to happen this year.
1. High unemployment, preventing consumption
2. High debt load (student, home, credit card) for prime age consumers, preventing consumption
3. Low wages and stagnant wage growth for prime age consumers, preventing consumption
4. Low job stability, leading to cash-in-mattress, preventing consumption
5. Low worker actualization and agency, leading to more time and energy spent at work, preventing consumption
6. Long term poor access to wealth-building financial instruments for most people, reducing accumulated wealth over time, reducing consumption
So as you can see, my opinion is that consumption is weak because people don't have enough money. The WSJ article has a small paragraph about tepid consumer spending, so I guess we agree there.
Aside from these core issues, I'd also speculate that a tremendous quantity of money is trapped in financial instruments. If it's in a financial instrument, it isn't exactly employing people or building goods or creating demand for goods. The same could be said about the billions of dollars held close to the chest by the oligarchy.
There's a huge opportunity here to have a government public works program or some other major initiative to mobilize the underclasses, but it won't be taken.
None of these issues are specific to Q1 2015, and they won't be fixed in Q2, Q3, or Q4.