Quote :

"appeals to authority do not convince me very much. "How many econ bloggers can you name that agree with your position!?!?" isn't a game i'm going to play."

I'll tell you now, feel free to ignore me, because I don't pay too close attention to what you are trying to say when you sprinkle in all your self important BS. You try to play economist, and you really work hard at it, but you just haven't earned mine (and it seems quite a few others) respect around here to take what you are saying at anywhere near face value. Why should I bother to spend the countless hours that you spend studying this so I can sound smart on the wolf web? I take what you say, see what professionals say, it doesn't agree, end of discussion.

I'm not surprised you don't want to appeal to any authority because you know you're arguments will get trumped in a second. I searched around the last time we had the U3/U6 debate, I couldn't really find anyone anywhere that basically said U6 was bunk (your position). I found a ton that thought U6 was extremely relevant. How is it some hack on this site knows more about this topic than a handful of professional economists?

1/12/2009 11:44:59 AM

^ never said U6 was bunk. In fact, I said the opposite. I only said that it wasn't the best way to measure cyclical variations in unemployment (deviations from the "natural" rate of unemployment that results from structural unemployment/job search/etc). Then, I gave several arguments for why I thought this was the case.

And what group of professionals agree with me? Well, the Bureau of Labor Statistics for one, who releases U3 as its official measure of unemployment (not U6).

The reason your bloggers repeat their mantra that U6 > U3 is because it is actually a fairly unorthodox position. If everyone already agreed with them, they wouldn't need to keep insisting that they are right. I know the BLS doesn't have a slick website like most bloggers you read, but please trust me that they are not a bunch of cranks and quacks.

That is all.

[Edited on January 12, 2009 at 12:54 PM. Reason : ``]

1/12/2009 12:41:44 PM

Quote :

"The reason your bloggers repeat their mantra that U6 > U3 is because it is actually a fairly unorthodox position. "

It isn't because most of them are professional money managers and their very livelihood to get things right depends on it? It's because they just want to be contrarian, oh I dunno, for shits and giggles?

Quote :

"I only said that it wasn't the best way to measure cyclical variations in unemployment (deviations from the "natural" rate of unemployment that results from structural unemployment/job search/etc). Then, I gave several arguments for why I thought this was the case."

Oh, nooowwwwww I get it (hand to forehead), this is just a cyclical period of unemployment. It all makes sense.

Quote :

"I know the BLS doesn't have a slick website like most bloggers you read, but please trust me that they are not a bunch of cranks and quacks."

Oh riiiiiiiiigghtttt, so we trust what the government says when it benefits our argument? They've had to revise down every month since I don't know when. They have a stupid birth death adjustment (at least, that is what my bloggers tell me, I guess that doesn't count for much), and they even reported adding jobs to the finance sector back in the October/Nov time frame when we know that was bullshit.

1/12/2009 2:55:48 PM

Here is another authority that is looking at U6
http://www.reuters.com/article/newsOne/idUSTRE5077TM20090109

And Barry...shocker...doesn't agree with him
http://www.ritholtz.com/blog/2009/01/unemployment-rate/


Now I'm really confused Sucks. Can you resolve all this conflict for me? You know all these bloggers and their motivations, please tell it to me?

1/12/2009 3:13:16 PM

^ Neither of those articles you link discuss the merits of U6 v U3. "Barry" is talking about an alternative measure of unemployment (not U3 or U6) created by John Williams.

And none of your previous points really touch on anything I said earlier ("Barry" doesn't make a red cent for picking which unemployment measure he likes best and nothing you said discredits the BLS as a quality organization for data collection and analysis).

I think I'm about done. Have a good afternoon.

1/12/2009 3:44:43 PM

From what I have read here, Socks is reasonable and making defensible arguments. nattrngnabob is not.

1/12/2009 3:59:47 PM

Quote :

"^ Neither of those articles you link discuss the merits of U6 v U3. "Barry" is talking about an alternative measure of unemployment (not U3 or U6) created by John Williams."

My link addresses your point that Barry is out to be unorthodox...for whatever reason. And when presented with the chance to be even more unorthodox (by hopping on whatever the the hip new cool ultra high unemployment rate du jour is) he didn't take it. So...I guess Barry and those that give more credence to U6 than someone who doesn't know econ (me or you) has their own little flavor of unorthodoxy that spans a little more than strange but not quite crazy, right?

Quote :

"and nothing you said discredits the BLS as a quality organization for data collection and analysis"

Nothing you said gives BLS credit. Here's yet another individual "out there" that questions BLS accounting methods.

http://www.bloomberg.com/apps/news?pid=20601039&sid=azttcmXd75qk&refer=home

He writes for WaPo. Can you remind me again if they were right or left leaning, since that seems to matter to you.

1/12/2009 4:34:08 PM

Quote :

"Oh riiiiiiiiigghtttt, so we trust what the government says when it benefits our argument? They've had to revise down every month since I don't know when."

When payroll numbers are first reported, they are merely estimates. The BLS doesn't receive all their surveys at the same time, so they estimate based on what they have. As more surveys are received, they revise their estimates. It doesn't mean they are arbitrarily changing the stats.



[Edited on January 12, 2009 at 9:04 PM. Reason : .]

1/12/2009 8:53:11 PM

An interesting perspective on the current recession: The Minneapolis Fed looks at the percentage change in nonfarm payrolls since the beginning of the recession and compares it with the 10 previous post-war recessions. While the velocity of change has been violent since September, the overall change since the recession began is not atypical, partly due to the relatively mild changes in payrolls the first half of the 2008. The recession isn't over, so its too soon to say how this will compare with past recessions, but the below is a little more reassuring than what the press likes to portend.




Here is the same with GDP:



http://www.minneapolisfed.org/publications_papers/studies/recession_perspective/index.cfm


[Edited on January 12, 2009 at 9:03 PM. Reason : .]

1/12/2009 8:59:24 PM

Circuit City pwnt. Not really a surprise. Going out of business liquidation to start tomorrow and expected to last 6-8 weeks. They employed 30,000+.

http://www.globest.com/news/1328_1328/northernvirginia/176378-1.html

1/16/2009 8:48:42 PM

Here's some nice data that illustrate that the job market was still much worse in 1982 than it is today (even after including discouraged and "underemployed" workers). I just hope legislators keep that in mind when they are scrambling to find 100s of Billions of dollars to "save" our economy (by building windmills in MA!!!).

Interestingly, looking at recessions since the 1970's, it looks like it takes more and more time for employment to reach its pre-recession peak. I wonder why that is. I think one reason might be the decline of manufacturing and the rise of the "creative" economy. If you work in a factory, it's relatively easy to lay people off and bring them back as needed. You left making paper, you come back making the same kind of paper the same way. How would do that at a internet start-up in 2001?

I dunno. It's just a guess.



[Edited on January 21, 2009 at 2:11 PM. Reason : ``]

1/21/2009 2:09:05 PM

Time to start blaming Obama for the economy.

1/21/2009 2:10:27 PM

Some selected excerpts from the Time Magazine Cover Story "Why We're So Gloomy"
http://www.time.com/time/printout/0,8816,974645,00.html

Quote :

""I haven't really been able to sort out exactly why there has been this degree of pessimism." ~Ex-President Bush Well, why are Americans so gloomy, fearful and even panicked about the current economic slump? In one of history's most painful paradoxes, U.S. consumers seem suddenly disillusioned with the American Dream of rising prosperity even as capitalism and democracy have consigned the Soviet Union to history's trash heap. Hard times are forcing some people to turn their back on the American Dream. "Whining" hardly captures the extent of the gloom Americans feel as the current downturn enters its 14th month. The slump is the longest, if not the deepest, since the Great Depression. Traumatized by layoffs that have cost more than 1.2 million jobs during the slump, U.S. consumers have fallen into their deepest funk in years. While some economists have described the current slump as a near depression, that phrase overstates the case if it is taken as a comparison with the period 1929-33, when the U.S. economy contracted by nearly a third. The D word becomes more valid, especially with a small d, when it is used to compare the growth rate of the 1930s, which averaged 0.5% a year, with the expected sluggishness of the next decade, which some economists predict will see an average growth rate of 2%. "I'm worried if my kids can earn a decent living and buy a house," says Tony Lentini, vice president of public affairs for Mitchell Energy in Houston. "I wonder if this will be the first generation that didn't do better than their parents. There's a genuine feeling that the country has gotten way off track, and neither political party has any answers. Americans don't see any solutions." The deeper tremors emanate from the kind of change that occurs only once every few decades. America is going through a historic transition from a heedless borrow-and-spend society to one that stresses savings and investment. When this recession is over, America will not simply go back to business as usual. The underlying change in the way American consumers and business leaders think about saving and spending will make the recovery one of the slowest in history and the next decade one of lowered expectations. Many economists agree that the U.S. will face at least several years of very modest growth as consumers and companies work off the vast debt they assumed in the last decade. The conditions that led to today's transition economy go back several decades. Americans have suffered a long-term stagnation of their earnings. The median income of U.S. families has virtually stood still since 1973, showing an annual gain of just 0.3% a year. The recent debt binge took place on a colossal scale in every sector of the economy. Runaway federal deficits have more than tripled the national debt. Meanwhile, consumers increased their IOUs from $1.4 trillion to $3.7 trillion last year. And U.S. industry raised its debt from $1.4 trillion to $3.5 trillion over the same period. The reckless borrowing made a reckoning inevitable. So far, though, no reprieve from layoffs is anywhere in sight. Economists say U.S. companies will shed more than 1 million jobs in fields ranging from banking to aerospace, a pace even faster than last year's. "It's become almost like a poker game to see who can cut the most," says employment analyst Lacey. "There's a kind of corporate frenzy." GM's plans to close 25 plants and cut 74,000 jobs, or 19% of its work force, scarcely addresses such problems as why it takes the company up to a year longer than the Japanese to redesign its cars."

MP: This was from the January 13, 1992 edition of Time Magazine, and the opening quote was from President George H.W. Bush, and the article was about the relatively mild 1990-1991 recession. Note: I altered some of the text above so that the specific time period was not obvious. Notice the distinct similarities to the reporting about today's economy.
http://mjperry.blogspot.com/2009/01/time-magazine-cover-story-why-were-so.html

[Edited on January 23, 2009 at 4:31 PM. Reason : quote]

1/23/2009 4:30:48 PM

^ Yah, I saw that over at Marginal Revolution. I think it serves as a really good example of how the media (and some economists) can cash in on hysteria. I saw an interesting Update on the webpage you linked to...that article was actually written 10 months after the recession ENDED (before before the end was announced by NBER). I think that should really humble anyone writing about current events.

I think another interesting read from the early 1990's is Paul Krugman's "Age of Diminished Expectations" (actually one of my favorite books). He concludes with a discussion about how the US economy would suffer from slow growth for the foreseeable future...only a couple of years before the tech boom led to the longest economic expansion in history.

1/25/2009 10:53:35 AM

Krugman underestimated the financial alchemy that Harvard, Yale, Columbia, Chicago, etc, wrought on the world. And guess what, he was still correct in that all the economic expansion you're describing is now being undone at an unprecedented rate. It's almost like the past decade didn't exist.

1/25/2009 11:46:45 AM

Odd that you say that. The inflation adjusted GDP is still far higher today than it was ten years ago. All the technology deployed over the past ten years is still deployed. I have yet to see roving gangs of the unemployed ripping up fiber optic from the street. My PC is still far faster today than it was ten years ago. Maybe you meant it another way?

1/25/2009 1:12:42 PM

natt,

Incorrect, friend. Not even Paul Krugman is making that argument. If you buy the idea that this is a "demand-driven" recession, then you can't help but agree with Barack Obama said on inauguration day--that we still have the same productive capacity we did before the recession began and that we only need the will to prime the demand pump (with infrastructure spending, tax cuts, and printing lots of money).

Of course, I personally don't believe that's the case, but I still don't see how you can argue that the productivity gains from the 1990's tech boom suddenly disappeared because a particular type of security market is in the toilet. The two are totally unrelated.

But whatever. It takes all kinds....

1/25/2009 1:17:32 PM

Anyways, to bring the discussion back to its original point...economic fortunes are hard to divine from media reports and even current economic data. Very brilliant economists can be totally wrong about where the economy stands and where it is headed.

If one can admit this (and I don't see how one can't), then one should be very skeptical about the power of a small number of individuals to centrally plan the economy. This goes back to Hayek's essays on knowledge and society over 60 years ago.

That isn't to say that government intervention can never do more good than harm, only that it is very very difficult to do so.

1/25/2009 1:24:28 PM

Quote :

"All the technology deployed over the past ten years is still deployed. I have yet to see roving gangs of the unemployed ripping up fiber optic from the street. My PC is still far faster today than it was ten years ago. Maybe you meant it another way?"

We weren't discussing Moore's law. We were talking about economic expansion, try to keep up.

Quote :

"Of course, I personally don't believe that's the case, but I still don't see how you can argue that the productivity gains from the 1990's tech boom suddenly disappeared because a particular type of security market is in the toilet. The two are totally unrelated. "

I didn't say it disappeared. I said we are right where Krugman said we'd be. He didn't and for the most part couldn't have known the geniuses of Wall Street could ignite asset bubbles to the extent that it could pull forward by years the GDP growth that happened as industries raced to feed home-ATM driven demand.

And I don't see how anyone can argue that a very large part of this recession is demand driven. Are you a lunatic?

[Edited on January 25, 2009 at 1:40 PM. Reason : .]

1/25/2009 1:33:14 PM

Quote :

"He didn't and for the most part couldn't have known the geniuses of Wall Street could ignite asset bubbles to the extent that it could pull forward by years the GDP growth that happened as industries raced to feed home-ATM driven demand."

So then you ARE saying that the past few decades of growth have left us in no better shape than we were in the 1991???

Look. Like LoneSnark pointed out, Real GDP per Capita is higher today than it was in 1990 (check out the Federal Reserve Economic Database, FRED: http://research.stlouisfed.org/fred2/) . There was a bubble in the housing market, but bubbles happen. It doesn't erase the past 18 years of economic growth.

And your point that Krugman couldn't foresee huge development in the technology sector that essentially changed American life forever is exactly my point (at one point he said that the internet would have the same economic impact as the fax machine--i.e. very little). Individuals, no matter how smart, have a hard time understanding and controlling complex systems like the US economy. So we should keep that in mind when we are formulating policy.

[Edited on January 25, 2009 at 2:17 PM. Reason : ``]

1/25/2009 2:10:32 PM

Quote :

"So then you ARE saying that the past few decades of growth have left us in no better shape than we were in the 1991??? "

You need to really step back and read what I am telling you. We'll do it in a different format.

1) Krugman says at some point in the early/mid 90s that growth will be slow for the foreseeable future
2) Internet boom and bust happens
3) Housing boom and bust happens
4) Growth pulled drastically forward on the back of these asset bubbles is now going to sit idle for years
5) At the end of the day, when we have returned back to the more normal trend line, Krugman won't be so far off from what he envisioned

Ie, if we are at point A heading to B, Krugman saw us getting there slowly, the asset bubles saw is get there and pass it quickly only to wait for B to catch back up to us during this recession.


I'm not even really sure why we're discussing this, did you suddenly come to the revelation that occasionally and frequently, predictions that are made about the economy going forward are wrong and you're suddenly wanting to warn everyone that such a thing could happen?

1/25/2009 2:21:57 PM

^ Your argument assumes that the past 18 years were a temporary diversion from a longer-term trend of mediocre growth. There is really no evidence for that and you haven't tried to offer any. Like I've been saying, and Paul Krugman and Barack Obama have been saying, there were real improvements in domestic productivity over the past 18 years that have made us a richer nation than we were in 1990. And there is nothing about the current crisis that suggests we can't return to a period of economic growth. If you believe differently, you need to post some evidence to the contrary.

And if you agree that the economy is incredibly complex and that even smart economists misunderstand what's going on in front of their own eyes, then that must surely make you skeptical about the government spending 100s of billions of dollars on stimulus packages when we're not really sure what the actual benefit of those packages will be (even Christine Romer's estimates show a relatively small impact on unemployment from Obama's package).

Of course, since you still vigorously support the fiscal stimulus (without any expressed doubts), I'm not exactly sure you get what you're saying. You seem to be trying to say that it's obvious that even smart economists can be very wrong about the economy while at the same time trying to say that "we really actually know what's going on THIS time and we know exactly what to do about it!! WE DO!!! THIS TIME we got it, right."

But I'm not really in the mood to feed your trolling. I would probably feel differently if you would offer evidence and arguments instead of insults. Please consider that in our future discussions (I have to work on a report now).

[Edited on January 25, 2009 at 3:17 PM. Reason : ``]

1/25/2009 3:14:02 PM

Quote :

"^ Your argument assumes that the past 18 years were a temporary diversion from a longer-term trend of mediocre growth. "

Where are you getting 18 years? We were talking about

Quote :

"only a couple of years before the tech boom"

.
Not that it matters too much, but if you set the starting point at the very end of a slightly worse than mild recession, and let 18 years pass, then your case is easier to make.

Just look at the S&P 500 by itself without any real context and you can get an idea of what Krugman was getting at. From around June of 82 to January of 88, the S&P rose ~150%. From January of 88 to about January 1995 (when the .com boom really started to take off) the S&P rose about 80%. So we have 2 more years to grow about half as much. I can only assume this is what was meant by mediocre growth since you don't site in link I can read and I'm obviously not gonna go out to Barnes and Noble to research this shit like you do to look good on the internet. Now, the chart really starts exploding, lots of growth. But, um, what happened. If you go from January 95 to January 2009, the S&P has risen...about 80%. Wtf?

Five years to rise 150%
Seven years to rise 80%
14 years to rise 80% and if the S&P goes back to the Nov 20 lows or worse, this number gets drastically uglier.

WTF?!!! Alert alert alert.

Quote :

"ike I've been saying, and Paul Krugman and Barack Obama have been saying, there were real improvements in domestic productivity over the past 18 years that have made us a richer nation than we were in 1990"

I guess it is a bit relative. I certainly felt richer for awhile, until I didn't feel richer. I suppose if you define a nation of skyrocketing public debt, fatter waistlines, and a continued march to laziness (thanks internet, HDTVs, etc), then yeah, we're richer, no question.

Quote :

"Of course, since you still vigorously support the fiscal stimulus (without any expressed doubts)"

I do? I supported a temporary intervention in the financial markets so that world armageddon wasn't wrought by a cascade of failures post-lehman. Since then, I've been pretty pissed that the economic decision making machine in this country is doing everything in its power to avoid marking the MBSs to market and propping up failed business models and letting those that didn't fail yet merge into sizes that are "too big to fail". I'm pretty sure I'm on the record in the past week being pissed about back door way TARP money has been funneled to the automakers - that is, by giving it to the financing arms and letting the auto makers give the cars away to sub primer borrowers at 0% interest.

Quote :

"But I'm not really in the mood to feed your trolling. I would probably feel differently if you would offer evidence and arguments instead of insults."

I already told you once that I simply don't have the time to do the type of reading and research you do to feel smart in these threads and that your arguments are just too half baked to warrant the type of credibility you think you deserve. I mean for fucks sake man, you claimed (well, at least seriously implied) professional money managers like to be contrarian apparently just for shits and giggles. You expect me to take that at face value? I did.

1/25/2009 4:55:35 PM

Quote :

"It doesn't erase the past 18 years of economic growth. "

almost all of the GDP growth since the mid-90's can be accounted for by debt, much of which will not or cannot ever be paid back.

Quote :

"And there is nothing about the current crisis that suggests we can't return to a period of economic growth. If you believe differently, you need to post some evidence to the contrary."

There is mathmatical evidence that exponential economic growth (e.g. 3%/year) cannot continue indefinitely.
why?
well....


[Edited on January 25, 2009 at 5:28 PM. Reason : .]

1/25/2009 5:26:00 PM

This graph is a little interesting, I thought, that LS posted in another thread...

If the population is growing, why isn't the private manufacturing and construction industries increasing their payrolls? I'm guessing technological advancements account for the missing workers, or maybe they just aren't paying their people as much.

But in any case, this does make me wonder at what point will we have too many people to have jobs for? Does such a point exist? How does China deal with this issue?

1/25/2009 5:35:52 PM

There's a neat show on the History Channel right now, comparing the 1929 crisis to now.

1/25/2009 6:31:24 PM

agentlion

Quote :

"There is mathmatical evidence that exponential economic growth (e.g. 3%/year) cannot continue indefinitely. why? well...."

Well, actually, if the economy grows at a steady rate of 3% per year, then it is growing linearly, not exponentially. Under exponential growth, the growth rate would be constantly increasing.
http://en.wikipedia.org/wiki/Exponential_growth

The fact we're talking about linear growth can be easily seen by comparing a graph of Real GDP to the exponential growth chart you posted earlier.
http://research.stlouisfed.org/fred2/fredgraph?chart_type=line&s[1][id]=GDPCA&s[1][range]=5yrs

I hope that clears up the confusion.

[Edited on January 26, 2009 at 7:08 AM. Reason : ``]

1/26/2009 7:02:06 AM

ahahah

http://www.youtube.com/watch?v=hoEbMrZ5uaA

Hilarious. Please to embed. Language very NSFW.

1/26/2009 9:24:32 AM

Quote :

"almost all of the GDP growth since the mid-90's can be accounted for by debt, much of which will not or cannot ever be paid back."

Debt cannot grow GDP, only productive effort is counted as GDP. If I borrow a trillion dollars from China and spends it on Chinese made goods, I have not increased U.S. GDP one iota. If I borrow from a fellow American, all I have done is eliminate their ability to consume since I took their money. As such, all debt does is shift consumption from savers to borrowers, it does not change the quantity of goods and services which constitute GDP.

Quote :

"There is mathmatical evidence that exponential economic growth (e.g. 3%/year) cannot continue indefinitely."

And that evidence is irrelevant, since the question is not "can growth reasonably continue at 3%/year for the next billion years?" The question is "can growth reasonably continue at 3% over the next year?" which is easy to answer afirmatively: the U.S. has the knowledge and the resources necessary to produce as much as we did last year and then some; the only question that remains is what we should bother producing?

Quote :

"Not that it matters too much, but if you set the starting point at the very end of a slightly worse than mild recession, and let 18 years pass, then your case is easier to make."

And if you pick your ending point at the bottom of a slightly worse than mild recession, then your case is easier to make. As such, to be fair, be consistent: if your starting point is a recession then end in a recession. If your starting point is at the top of a boom, then you must wait for the next boom to top before taking readings.

1/26/2009 10:01:10 AM

Quote :

"If I borrow a trillion dollars from China and spends it on Chinese made goods, I have not increased U.S. GDP one iota."

Good thing all the debt we borrowed from China went directly to China, and not to any US interests or anywhere else.

Quote :

"If I borrow from a fellow American, all I have done is eliminate their ability to consume since I took their money."

And you are implying that they would have consumed, which we don't know.

Quote :

"the only question that remains is what we should bother producing? "

Obviously, nothing, since there exists a demand shortage.

Quote :

"And if you pick your ending point at the bottom of a slightly worse than mild recession, then your case is easier to make. As such, to be fair, be consistent: if your starting point is a recession then end in a recession. If your starting point is at the top of a boom, then you must wait for the next boom to top before taking readings."

I knew someone would quibble about this. Again, it ultimately doesn't matter too much when you can eyeball the the chart and see the asset bubbles and corrections back to the norm and see that Krugman wasn't really that off in his assessment about the growth from the mid 90s to now being mediocre. What "boom" can I pick in the '95 area where the chart starts to diverge (the slope up gets greater) and compare it to the most recent boom? We'll have to wait years to see where the norm returns to before we can find out how much of the growth was excess debt fueled and should be discounted and how much of it was legit and real and will remain.

1/26/2009 10:33:51 AM

Quote :

"And you are implying that they would have consumed, which we don't know."

What are you suggesting? People work hard to earn money and then shove it into their matress? It is only a matter of time until the American people re-achieve equillibrium with their expectations and the business class re-arranged production to produce what people actually want to buy, putting the currently un-used resources back to work and returing to GDP levels markedly above the recent peak.

Quote :

" Again, it ultimately doesn't matter too much when you can eyeball the the chart and see the asset bubbles and corrections back to the norm"

But the current figures are not the norm: they are during a recession. In-so-far as a boom is artificially high, a bust is artificially low: there are unutilized land, labor, and capital laying around not producing anything. As such, there is no way to know what the American people are capable of producing.

1/26/2009 5:36:06 PM

Quote :

"It is only a matter of time until the American people re-achieve equillibrium with their expectations and the business class re-arranged production to produce what people actually want to buy, putting the currently un-used resources back to work and returing to GDP levels markedly above the recent peak."

People weren't buying what they wanted before? People that suffered massive personal loss are going to be able to return to their overly consumptive ways in the short term? Americans that get torched by this recession aren't going to be (on average) more frugal with savings?

Quote :

" But the current figures are not the norm: they are during a recession. In-so-far as a boom is artificially high, a bust is artificially low: there are unutilized land, labor, and capital laying around not producing anything."

And we don't know how far down it will go and where it will finally come back up and settle at. But it isn't an unreasonable assumption to think we'll return to the trend line with less leverage and credit being poured into the system.

1/26/2009 6:07:47 PM

Quote :

"People weren't buying what they wanted before? People that suffered massive personal loss are going to be able to return to their overly consumptive ways in the short term? Americans that get torched by this recession aren't going to be (on average) more frugal with savings?"

So what if they are? All frugality changes in the long-run is who consumes (those with incomes consume/invest more, those without incomes consume less) and what they consume, it does not alter production. A more frugal society will achieve stability producing smaller homes and fewer big-screen TVs by producing more automated factories, technology research centers, and pharma.

To put it bluntly, our debt-heavy mentality has markedly retarded America's GDP growth over the past decade by diverting money away from investment and market competition into consumer goods. And yet even with all this diversion we still managed to bust Krugman's trendline prediction. Now that this has changed, which I doubt it really has, America's productive capacity should grow faster now than it otherwise would thanks to lower interest rates. We might have cured cancer by now if not for all those empty houses spread across the countryside.

1/26/2009 10:39:12 PM

Quote :

"Well, actually, if the economy grows at a steady rate of 3% per year, then it is growing linearly, not exponentially. Under exponential growth, the growth rate would be constantly increasing. http://en.wikipedia.org/wiki/Exponential_growth The fact we're talking about linear growth can be easily seen by comparing a graph of Real GDP to the exponential growth chart you posted earlier. http://research.stlouisfed.org/fred2/fredgraph?chart_type=line&s[1][id]=GDPCA&s[1][range]=5yrs I hope that clears up the confusion."

Increasing by a percentage every year is, in fact, exponential growth. Basically you have a doubling of the economy every 23 years. That is not very "fast" exponential growth, but it fits the definition.

Linear growth would be an increase of a constant dollar amount.

1/27/2009 5:45:09 PM

^ thanks, i wasn't going to argue. but I went back to that graph and looked -
so, yes, over 5 years, GDP looks linear. But take that graph out to the max, and this is what you get


you see a clear curve, and if you change the Y-axis to a logorithmic scale, then you would see the graph appear linear.

Same is true of the stock market. It grows at, what.... 6-8% per year?

On a log scale, it looks fine - perfectly sustainable


on a linear scale? JESUS FUCK, what the hell?!


[Edited on January 27, 2009 at 6:19 PM. Reason : .]

1/27/2009 6:18:27 PM

Quote :

"How does China deal with this issue? "

about 80% of their pop. is subsistence farmers

1/27/2009 10:09:51 PM

well this sucks....

NC has the 2nd largest change in unemployment from 07-08, of 4%, only behind RI

http://online.wsj.com/public/resources/documents/JOBLESSDATA08.html

1/29/2009 1:43:47 AM

Man, Elizabeth Dole sure did a great job

1/29/2009 5:18:09 AM

i don't like/dislike her, but it's not her fault

2/3/2009 10:07:02 AM

In exactly one week I'll be helping NC push for #1 on that chart!!

2/3/2009 11:37:18 AM

Socks...

Quote :

"Well, actually, if the economy grows at a steady rate of 3% per year, then it is growing linearly, not exponentially. Under exponential growth, the growth rate would be constantly increasing. http://en.wikipedia.org/wiki/Exponential_growth The fact we're talking about linear growth can be easily seen by comparing a graph of Real GDP to the exponential growth chart you posted earlier. http://research.stlouisfed.org/fred2/fredgraph?chart_type=line&s[1][id]=GDPCA&s[1][range]=5yrs I hope that clears up the confusion."

Wrong. If something is growing by a steady percent, then it is by definition growing exponentially. For example. GDP is 100. After 1 year of 3% growth it will be 103. After another year of 3% growth it will be 106.09. Another year it will be at 109.2727. That means that it's growing exponentially.

Math: You're thinking like this... GDP(next year) = GDP(present) * (1 + .03)^1
But in reality, constant percentage growth would be... GDP(next year) = GDP(present)^(1 +.03)

2/4/2009 11:32:07 AM

Your equation sucks.

100^(1+.03) = 114.8

But yes, if something grows at a set percentage it is growing exponentially, not linearly.

[Edited on February 4, 2009 at 12:24 PM. Reason : 2]

2/4/2009 12:22:59 PM

dear lord

http://youtube.com/watch?v=x8hMJVXt09E

2/4/2009 1:56:06 PM

I just lost my job 5 times while watching that video... amazing

2/4/2009 1:57:59 PM

^^ i'm no fan of Pelosi at all, but that clip is clearly a slip of the tongue in the same way that Obama's "we've been to 58 states" was. He obviously meant to say "48 states" and Pelosi obviously meant to say 500 thousand instead of 500 million. It's true that 500,000 are losing their jobs each month, of course, it's not necessarily true that the passing a stimulus would immediately change that.

on to other job and economy news....

2/9/2009 5:20:24 PM

The decline in the first chart is a little misleading as it does not take into account changes in the size of our workforce.

Here is a similar, albeit more accurate, chart with percentages.

2/9/2009 10:15:10 PM

It doesn't look sooo terrible on the surface until you consider that the post .com boom job growth was the weakest post war. You'd expect if the job growth between recessions was weak that the losses wouldn't be so great as they are. It's data points like that which should serve as a real gauge for where we are headed. L shaped recession, here we come.

2/9/2009 10:21:15 PM

Quote :

"To put it bluntly, our debt-heavy mentality has markedly retarded America's GDP growth over the past decade by diverting money away from investment and market competition into consumer goods. And yet even with all this diversion we still managed to bust Krugman's trendline prediction. Now that this has changed, which I doubt it really has, America's productive capacity should grow faster now than it otherwise would thanks to lower interest rates. We might have cured cancer by now if not for all those empty houses spread across the countryside."

I am not sure that extra consumption lowered the US growth rate over the past decade.

What it did was divert current consumption from Chinese families to US families. To some extent this will result in a reduction in US consumption in the future and an increase in Chinese consumption.

Though this trade-off is not completely clear because the Chinese got an incredibly bad deal in strict asset terms. In effect they bought low returning assets high and are going to end up selling them low.

So they are just going to take a huge capital account loss on their on their investment in the US.

However, they of course don't really care about their capital return. They care about demand for current products. I think the error here from standard economic models is that there seems to be increasing returns to scale at least at some levels of production. Most of our models assume constant returns to scale.

I think most economists recognize that there are increasing returns at some level and that's why cities exist. Normally that's not very important but China was literally building cities straight out of the ground, pulling 10s of millions of people from the Chinese countryside.

Quote :

"There is mathmatical evidence that exponential economic growth (e.g. 3%/year) cannot continue indefinitely"

I am not sure this is meaningfully true. Now there is the fact that given there are so many possible configurations of a finite set of subatomic particles. Hence, if we rank the possible configurations from lowest to highest there will be some economically maximal configuration. Once that configuration is achieved things can't get any better.

However, that is a lot of configurations even if we only have the earth to work with.

2/9/2009 11:36:23 PM

populations grow exponentially, in general, it only makes sense for the economy to grow at this rate...

Quote :

"I am not sure this is meaningfully true. Now there is the fact that given there are so many possible configurations of a finite set of subatomic particles. Hence, if we rank the possible configurations from lowest to highest there will be some economically maximal configuration. Once that configuration is achieved things can't get any better. "

I agree with your explanation, but I disagree that it's not meaningfully true. I think it's more likely that we will end up choosing a non-optimal configuration, resulting in an economy with stunted growth relative to the population. To an extent, we are already in a mild form of this situation.

[Edited on February 9, 2009 at 11:48 PM. Reason : ]

2/9/2009 11:45:16 PM

Quote :

"populations grow exponentially, in general, it only makes sense for the economy to grow at this rate..."

ok, lets take one step back then..... instead of saying economies cannot grow at 3% indefinitely, let's say that populations cannot grow at 3% indefinitely. If you accept that as true, then the rationale for the economy continuing to grow is shot.
And you have to accept that indefinite population growth is impossible because we do live in a finite country with finite resources.

2/10/2009 12:06:28 AM