Retirement Blues

The Real World of Real Work

2012-01-29T12:05:00.000-05:00

I was reminded again of this, while reading this comment from Steve, at his own blog (following Art's link.)

My sister, after abandoning the Berkeley Phd astrophysics program, ended up [with no programming experience] programming those Visa mainframes that process billions of transactions a night — in assembler! I asked her once if she used any of her higher math from college, calculus and such. “No,” she said, “we pretty much just add and subtract. On rare occasions we’ll get really abstruse and multiply or divide.

Which is tangential to the topic Steve, et. al. were discussing, but keys right into something that I was thinking about. I have two degrees in Chemistry, B. S. and M.S. I worked in industry from early June of 1968 until the end of November in 2008 - a tad over 40 years. If you aggregated all the time I spent doing actual chemistry, it might total a few months; certainly it was far less than two years. If you aggregated all the time I spent doing things where my knowledge of chemistry directly informed my ability to function, it would total somewhere in the range of 15 to 20 years. Dealing with Mechanical Engineers threw this into stark relief. A typical Mechanical Engineer simply would have been incapable of doing my job. Just as I would have been incapable of doing her's - for that 30 to 50% of the time, unless I received some amount of specific training.* Also, I'll posit that specific engineering knowledge was a relevant enabler to the M.E. no more than 50% of the time.

Here is a related anecdote. Some of my musician friends are employed as computer programmers. Their education is in music. Their employer specifically seeks musicians because training them is especially easy. There is some sort of fit between the musician's mind and the tasks to be performed.

My point is that doing something other than what you were educated to do is not a misuse of talent, except in the most egregious examples - frex PhD' physicists driving cabs, Engineers delivering pizzas, Accountants digging ditches, Economists doing economics. (Sorry, couldn't resist the dig.)

Realistically, your education does not prepare you for the world of work, and most specifically, the chance of it preparing you for the job you actually get is almost vanishingly small.

__________________________________________

* Some of this is skill and training related, and some has to do with individual brain idiosyncrasies, interest level and willingness to learn. I'll bet I could learn the M.E.'s job with very little additional training. Engineering is applied math, and I'm reasonably good at that. Not so the other way around. At the briefest mention of anything remotely chemical, the M.E.'s eyes glaze over. Persist, and they will run, screaming, from the room.

Right to the Moon

2012-01-28T23:12:00.002-05:00

My Lovely Wife suggested that I make a blog reference to the Newster's moon base idea, incorporating Ralph Cramden's classic threatening, fist-in-her-face line: "One of these day's Alice . . . . Pow - right to the moon!"

Well, that's how I remember it, anyway.

I am nothing, if not obedient. My intent was to find (rather cop-outishly, I'll admit) a brief YouTube clip featuring that line. But, alas, no. If you can do better, please let me know.

Then, she went and found this page. Hoo-boy. Pwned by my spouse.

At the link above, Groobiecat did all the heavy lifting, and put up a damned good post, including a fun Photoshopped pic. A must-read, I'd say.

Now, by way of fair and balanced (choke!) reporting, I'll also direct you to the ever independent-thinking Tux's defense of the out-of-this-world Newtonian moon-base idea.

My answer to Tux's "What's the matter with a Moon base?" question includes these points:
- the cost, which in a world filled with austerians, is an automatic no-go;
- the lack of a real need to do anything specifically lunar;
- the unsustainability of a moon base;
- Newt is a lying political opportunist, playing to the Florida space industry base. His plan isn't a realistic proposal. It is a cynical, pandering ploy for votes;
- did Newt really float the idea of the Moon becoming a 51st State, or was that commentator hyperbole?

Tux talks about employing all sorts of highly skilled professionals in this potential program, and you can't simply gainsay that. However, on balance, the negatives overpower, I think. Besides - isn't there some sort of a project, right here on earth, that would employ all those same skilled professionals, while doing something real?

Space exploration has a very high cool-geek factor. But, deep in my heart, I believe the time for manned space exploration has come and gone. Actually, several decades ago.

There are pressing needs here at home, and excess brain-power available to devote to solving them.

Shouldn't there be some realistic way way to bring them together?

On the other hand, though - and more fundamentally - we don't have structural unemployment. If we did, this kind of specific skill-matching program would be right on the mark. What we do have is general unemployment. The answer to that is to correct the aggregate demand shortfall.

I wonder what Keynes would say?

What the Hell?!? Friday - Memory

2012-01-27T18:38:00.001-05:00

Is This Where The Newt Slithers Back Under A Rock?

2012-01-27T13:51:00.000-05:00

I didn't watch the Rethug debate last night. there is only so much idiocy I can take without having my head explode. But, from what I've gathered, Newt more or less imploded. Maybe this was predictable. The man is wildly erratic.

Krugman whimsically posts this.

You needn't click through, here is the vid he embedded, saying only: "I gather from those who watched the debate that this is pretty much over."

My take as a jazz guy has to do with the music, rather than the message.

I find it quite interesting that Diana Krall's performance is so informed by this Sammy Nestico arrangement. I've played it many times, and it comes close to being my absolute most favorite arrangement of anything.

UPDATE: In comments, nanute directs us to this, earning a big H/T.

Wealth vs Income

2012-01-27T11:27:00.000-05:00

Usually my articles present facts and data and try to drive down to a conclusion. This time, I'm going to drive down to a couple of questions.

Recently, Noah Smith had a post on the subject of economic models titled Filling a hole or priming the pump? It did quite a bit to restore my lack of faith in the pseudoscience of Economics, but that is more or less beside the point. Roger Farmer, cited in the post, left a long comment that Noah hoisted up the main page. Farmer concludes:

My reading of the evidence is that consumption depends primarily on wealth rather than income. That was the lesson of work by Ando and Modigliani, Modigliani, and Friedman in the 1950s. It is for that reason that I support interventions in the asset markets that try to jump-start the economy and reduce unemployment by boosting private wealth. That, in my view, is what quantitative easing has done.

Ok - I'm taking on decades of economic research here, but my first question relates to: "My reading of the evidence is that consumption depends primarily on wealth rather than income."

First, let's remember that wealth distribution is on the order of the top 1% owning 40% of the wealth, and the bottom 80% owning 7% of the wealth. And that 7% is not evenly distributed. There are significant fractions of the population who have a) no wealth at all, or b) negative net worth. Either way, they are living hand to mouth. This suggests that 1) they have unmet needs, and 2) will spend the next available dollar trying to satisfy one of them.

So far, this is just a thought experiment. Let's take a look at how personal consumption expenditures track disposable income. Here is percent change from previous year:

Both in the grand sweep and in the year-to-year detail, the curves are pretty much in lock-step.

Here is the data on a Log Scale:

That's coordination about as close as you could ever hope to see in real world data.

And if wealth - or it's perception - were the determinant, wouldn't you expect some sort of a consumption bump during the housing bubble, when people felt wealthier than their incomes justified? Let's look at consumption expenditures per capita.

Here, there is a slope increase, mid last decade, but it's not great, and it's no greater than the slope of the late 90's. I suppose the tech boom must have had some people feeling wealthy then, as well. But they weren't that bottom 80%. Note that the first graph indicates the personal disposable income was up in those periods as well. In fact, they were the only up periods since about 1980.

There was also relatively low unemployment in those times, and thus more people with incomes.

Also, it just seems counter-intuitive in a world where, if real people think about money at all, it's in a personal cash flow context, not in terms of wealth aggregates. Consuption decision reasoning, to the the extent that it even occurs, is along the lines of: "If I buy this thing, can I still afford to feed my cat?"

So, here is question number 1:

Since to most people "wealth" is miniscule, non-existant, or worse, and given empirical data that closely links consumption to income, how can consumption depend "primarily on wealth rather than income?"

Now let's look at Excess Reserves of Depository Institutions.

There's 1.6 trillion QE dollars. Any left-overs have gone to leveraged speculation causing commodity inflation.

But Farmer says: "I support interventions in the asset markets that try to jump-start the economy and reduce unemployment by boosting private wealth. That, in my view, is what quantitative easing has done."

If any wealth has been boosted here, it is in the upper reaches of the already wealthy, not among the working stiffs who are highly inclined to spend the next dollar rather than hide it away in Luxombourg or the Cayman Islands.

So, here is question number 2:

How can QE money help the economy when it is either sitting idle or inflating commodity prices?

I have nothing in particular against Roger Farmer, about whom I know nothing, but I am also prompted to ask economists in general:

What in the hell is the matter with you?

So maybe my lack of faith in Economics is the point, after all.

Cross-posted at Angry Bear.

Poor People Have Shitty Lobbyists

2012-01-25T13:41:00.000-05:00

I think that is what Stewart says at the end of the clip.

Meanwhile, here are some good insights into the mind of Mitt.

The Daily Show with Jon Stewart
Get More: Daily Show Full Episodes,Political Humor & Satire Blog,The Daily Show on Facebook

Despicable!

2012-01-25T12:56:00.001-05:00

Frankly, I was appalled by the Gingrich response to John King's open marriage question last week at the start of the 75488929th Rethug "debate." It got worse, but we'll get to that later.

Newt did what conservatives always do when they have no answer. He changed the subject.

He did what Rethugs always do when they should rationally be considered defenseless. He flipped the enormous negative into an enormous positive. Here, I'll just turn it over to John Stewart, who is an actual professional at this sort of thing.

It's later. Here's the getting worse part. Newt was trailing significantly in S.C. until he unleashed his inner bulldog on the utterly hapless John King. Whether this was a planned outcome or King was simply totally unprepared is something I'll let the conspiracy theorists sort out. But it's clear that at that moment Newt won the flinty hearts and defective minds of the the sociopathic mob known as the South Carolina Rethug electorate.

As exhibit B, I'll point out that when revelations of Herman Cain's sexual harassment surfaced, his campaign received a surge of donations.

This is sick, appalling, and - yes - despicable.

This is what conservatism has degenerated into.

This is the modern Republican party.

Stockman on Crony Capitalism

2012-01-24T20:25:00.003-05:00

Holy socialization of losses, Batman. I had no idea I was channeling David Stockman when I wrote this post. Thing is, Stockman is an unreformed free-market Reaganite supply-sider. But not quite the free market guy I imagined him to be, as it turns out - a least as it regards Glass-Steagall and derivatives regulation. He's all about a certain kind of creative destruction, though, that I find myself applauding.

Notable quote: "If it's to big to fail, it's too big to exist."

I listened to this with an ear toward finding something I would disagree with. The most I can come up with is his cry for "free market capitalism," past the the 30 minute mark. Amazingly, at the end, he even channels Bernie Sanders. I'll never be a Stockman fan, though.

What's striking is that when someone as far to the right as he is lines up on the same side of an issue as I do, it shows just how far out of bounds things have gone.

David Stockman on Crony Capitalism from BillMoyers.com on Vimeo.

Huge H/T to Daniel Becker in comments at AB.

Where Has All The Money Gone, Part II - Finance Sector

2012-01-24T11:52:00.000-05:00

In Part I we saw that labor's earnings have lagged far behind GDP growth. (More on earnings stagnation here) Meanwhile, corporate profits have grown at a rate that, until recently, increased over time, and they are now at a historically high fraction of GDP.

Here is a specific look at the Finance Sector. The graph shows finance sector profits as a percentage of total corporate profits - all after tax.

That's a pretty impressive sweep up over time. I threw some best fit curves through the whole data set, and also though the peaks and valleys. Curves through the extremes are exponential.

Along with the increased percentage we get a dramatic increase in the data spread.

When lines jump around a lot, you can sometimes get clarification by looking at a long average. I tried that here with a 13 year average.

A long average filters out the hash, and reveals the underlying trend. Or, I should say, trends, since there are two, with a sharp break at the beginning of 1986. A best-fit least squarestrend line on the data through '85 is a near-perfect match to the average line, which barely even wiggles. We see a bit more action in the post-85 segment, but the new trend is still very clear, indeed. The earlier trend line in green is now the lower channel support line.

The finance sector has captured an increasing fraction of corporate profits, which have been growing at an increasing rate since WWII. And the growth rates are greatest when the economy is doing the worst. Take another look at the first graph. The correlation of finance sector profit peaks with recessions is close to perfect. Peaks are in Q2-1949, Q3-1952, Q4-1953, Q1-1958, Q1-1961, Q4-1970, Q1-1986, Q1-1991, Q4-2001. The peak in 1986 is the only one that does not correspond to a recession.

The finance sector provides a vital function. It is there to facilitate and enable the wheels of industry to turn. But policy matters. What has happened in the age of deregulation and lax taxation is that the finance sector has come to dominate the economy. This is madness. And here is your Great Stagnation, folks.

Beyond the point of supplying necessary financing for businesses and mortgages, financial manoeuvrings - speculation in particular, and most especially so with sophisticated derivatives that nobody knows how to rationally evaluate - become rent seeking. This is a massive misallocation of resources, diverting capital from real investment into totally non-value-added financial tail chasing.

And I'm not the only who thinks so. Here, Paul Krugman calling the whole operation A Giant Scam, quotes Andrew Haldane, Executive Director, Financial Stability, Bank of England:

In fact, high pre-crisis returns to banking had a much more mundane explanation. They reflected simply increased risk-taking across the sector. This was not an outward shift in the portfolio possibility set of finance. Instead, it was a traverse up the high-wire of risk and return. This hire-wire act involved, on the asset side, rapid credit expansion, often through the development of poorly understood financial instruments. On the liability side, this ballooning balance sheet was financed using risky leverage, often at short maturities.

In what sense is increased risk-taking by banks a value-added service for the economy at large? In short, it is not.

Haldane's article was reposted at Naked Capitalism. What he is getting at is the derivatives market, the unregulated darling of the World of High Finance. Estimates vary, since there is no good way to get a handle on it, but the highly leveraged derivatives market has a notional value somewhere between 10 and 25 times the aggregate value of global GDP. In the wake of Phil Graham's undoing of Glass-Steagal came a sea change in the way the Finance Sector does business, and along with this came a shift from risk management to risk-making. As Haldane put it: "If risk-making were a value-adding activity, Russian roulette players would contribute disproportionately to global welfare."

Since none of this activity does anything to create real wealth, it is nothing but rent-seeking. That is bad, in and of itself. Worse, still, in Krugman's words: "Wall Street and the City were con artists extracting huge rents from an unwary public (and eventually dumping much of the cost, when things went bad, on taxpayers)." What is perhaps worst of all is that the money locked up in these ventures is diverted from real investment.

So, here is the picture. While the average earnings of working stiffs has been stagnant, at best, corporate profits have grown at an increasing rate. Further, the percentage of those profits going to the Finance sector has also grown at an increasing rate. Total profit growth is above exponential, and Finance Sector profit growth is super-exponential.

To summarize:
1) Over the last 30 years banking has devolved from a necessary financial function involved in the allocation of resources and management of risk to essentially non-value-added rent-seeking activities implemented through high risk practices.
2) When the whole house of cards came tumbling down, the losses were socialized, while the criminals who perpetrated the underlying fraud walked off not only scot-free, but with huge bonuses.

There might be some way to justify this if it were leading to greater GDP growth or a rising tide that lifted all the boats. But the opposite has happened. GDP growth has been in decline for decades, and the tsunami of profits floating the yachts in the Finance Sector has swamped all the dinghies.

Cross Posted at Angry Bear.

Florida

2012-01-23T16:45:00.001-05:00

Here is a Romney attack ad on Newt.

Sadly, one of these rats will be the Rethug nominee for president later this year.

NFL Postseason

2012-01-22T23:02:00.000-05:00

The championship games have resulted in the worst possible outcome.

Of course, so did last week's playoff games.

I don't have much feeling one way or the other for the Giants. I do have some faint positives for the 49ers. Don't ask me why. But I loath the Patriots, and I especially loath Tom Brady. It is particularly disappointing to see them win when he had a pretty bad day. I did so much want him to be the goat.

Whether I will even watch the Super Bowl is at this point an open question.

As an aside, it seems that neither Joe Flacco nor Alex Smith is above the mediocre level as a QB, despite Smith's heroics last week.

What It Means To Be Conservative

2012-01-21T22:16:00.001-05:00

Here are some characteristics of American conservatives, based on how a State votes.

Typically more overweight.

More likely to be receiving food stamps.

Less likely to have graduated from high school.

Less likely to have the labor force represented by a union.

More likely to receive federal aid in excess of contributions.

More likely to be violent.

Have higher incarceration rates.

Have far more executions.

Are are much more deeply religious.

In short, the word "conservative" seems to be an apt label for a syndrome--a long list of psychological and cultural maladies--that wreak havoc on both individuals and communities

This is not hyperbole. Karlo has the facts and the graphs to back up what he just said. Go check it out.

Republicans, All Wrong, All the Time, Pt 32 - Obama Has No Jobs Plan

2012-01-21T12:05:00.001-05:00

This is one of the many lies we get from the damned lying liars in the clown car passing for the slate of Rethug presidential candidates.

Here is the truth.

Picture source

Here's Andrew Sullivan:

On the economy, the facts are these. When Obama took office, the United States was losing around 750,000 jobs a month. The last quarter of 2008 saw an annualized drop in growth approaching 9 percent. This was the most serious downturn since the 1930s, there was a real chance of a systemic collapse of the entire global financial system, and unemployment and debt—lagging indicators—were about to soar even further. No fair person can blame Obama for the wreckage of the next 12 months, as the financial crisis cut a swath through employment. Economies take time to shift course.

But Obama did several things at once: he continued the bank bailout begun by George W. Bush, he initiated a bailout of the auto industry, and he worked to pass a huge stimulus package of $787 billion.

All these decisions deserve scrutiny. And in retrospect, they were far more successful than anyone has yet fully given Obama the credit for. The job collapse bottomed out at the beginning of 2010, as the stimulus took effect. Since then, the U.S. has added 2.4 million jobs. That’s not enough, but it’s far better than what Romney would have you believe, and more than the net jobs created under the entire Bush administration. In 2011 alone, 1.9 million private-sector jobs were created, while a net 280,000 government jobs were lost. Overall government employment has declined 2.6 percent over the past 3 years. (That compares with a drop of 2.2 percent during the early years of the Reagan administration.) To listen to current Republican rhetoric about Obama’s big-government socialist ways, you would imagine that the reverse was true. It isn’t.

Link to Part 31.

Jon Snow, Lord Commander of the Night's Watch

2012-01-19T14:26:00.004-05:00

Reduced to a haiku.

The ice wall stands hard,

Stark against the cold terror:

Winter is coming.

Shorter Leda and the Swan

2012-01-19T13:55:00.000-05:00

Reduced to a Haiku.

Gods and mortals, eked
From a woman's loins; Great God:
He flipped her the bird.

Original can be found here.

Huntsman Endorses Romney

2012-01-17T11:02:00.003-05:00

John Huntsman is throwing in the towel, after consistently polling in the low single digits. (Eschewing an obvious joke here.)

Now he endorses Mitt the Ripper. Propitious flip-flop? You be the judge.

Shorter Sonnet 12

2012-01-16T16:21:00.000-05:00

Reduced to a Haiku

All ages, withers,
Dies. You too. Now - you look fine!
Let's make a baby.

Original can be found here.

Mitt The Ripper

2012-01-16T15:13:00.001-05:00

The Colbert Report
Get More: Colbert Report Full Episodes,Political Humor & Satire Blog,Video Archive

Vid found here.

Ayn Rand Truthiness

2012-01-16T14:09:00.000-05:00

To see someone do something I wish I woulda, and to see it done better than I evah coulda is a chastening experience.

Ayn Rand Truthiness, Pt 1.

Ayn Rand Truthiness, Pt 2.

The 1959 Mike Wallace interview.

And, to save you a click-through, here is what started it.

And this is how it works.

H/T to RJS in coments at AB

GDP Revisions

2012-01-16T11:40:00.004-05:00

This is just a short post to illustrate the magnitude of GDP revisions. I downloaded quarterly GDP data from BEA in June 2011. I went back to BEA this morning to update the file. Forgetting about GDP revisions, I thought I'd be adding 2 or three more quarters of data, but discovered that all the numbers since Q2 2003 had been revised. Prior values are unchanged. Plotted below is the difference between the June, 2011 numbers and what I found this morning.

The depth of the trough in Q3 2009 was $194 Billion worse than we thought just a few months ago. I was surprised to see the revisions go back a full 9 years.

Tyler Cowan got one thing right. We are poorer than we think we are.

Cross Posted at Angry Bear

What A Lannister Always Pays

2012-01-14T11:26:00.000-05:00

Here is a look at various types of debt.

Linear scale.

Log scale.

All we ever hear about is the size of the Federal Debt.

It is dwarfed by total credit market debt.

It is only slightly larger than non-financial corporate business debt.
It is no larger, and in recent years has typically been smaller than
- Household credit market debt
- Domestic financial sector debt.

Nobody (well, almost) ever talks about any debt other than federal.

But it is the least of our problems.

___________________________________

In case anyone doesn't get the reference.

When Mitt Romney Came to Town

2012-01-11T22:57:00.003-05:00

Here is the full 28 minute video that Newt's organization put together to tell the world about Mitt Romney. Is it slanted? Probably. I won't suggest that Newt has anything resembling scruples, even in a vague way. But is it swift-boating? I have my doubts on that account. If the record is real, then it is just painful truth. Truth is, this story is told with a lot of pain. And, really -- isn't this what vulture capitalists do?

The amazing thing is that it is coming from another Rethug - specifically, the guy who only days ago was whining about the attack ads on him. As if he actually had a soul. Wow - we are really screwed.

H/T to the LW

Where Has All The Money Gone, Pt I, Corporate Profits Redux

2012-01-11T14:52:00.000-05:00

Here, I'm reworking the ideas of this post. (Updated and edited on 1/12)

INTRODUCTION

1) Rethug Speaker of the House John Boehner says that as a nation, "we're broke"; Rethug presidential candidate Ron Paul claims America "should declare bankruptcy." I say these two are liars, and at least one of them is crazy.

2) Tyler Cowan says "we are poorer than we think we are," due to mismeasurement of value, which might be true. I believe his prescription for recovery is generally very bad, though.

3) In comments to my previous Angry Bear post, Bob McManus directed us to the writings of Michael Hudson, where we find his post Democracy and Debt. This is must reading. The relevant point here is that the increasing capture of wealth, as rents, by a creditor class impoverishes society in general, and this eventually leads to severe repression, major social upheaval, or both. I whole-heartedly agree.

4) Jon Hammond's guest post at Angry Bear shows that a more-or-less continuous decrease in real investment has occurred during the post WW II era.

In this series of posts, I intend to show that we are a wealthy nation, but that our wealth has been increasingly captured by elite creditors, who, in my opinion, are strangling the economy by 1) extracting excessive rents and 2) diverting this wealth to financial tail chasing, rather than real investment.

UPDATE (1/12): WHERE THE MONEY HASN'T GONE

Here is a look at average hourly earnings, the typical income of a working stiff, presented on a log scale.

Like almost every time series you can imagine, including GDP, it exhibits a break near 1980. The break is always to lower growth. But, compared to most other data series, this break is especially sharp.

Hear is the same series compared to GDP, an approximate measure of the income of the nation, on a linear scale. For this graph, each is normalized to a value of 100 in Q1, 1965.

While earnings have grown less than 8 times in 47 years, GDP has grown more than 20 times.

Clearly, the money has not gone to compensation of the workers whose labor actually creates the wealth of the nation. That might explain some of the alleged envy. (end update)

CORPORATE PROFITS

As a first step in finding where the money has gone, let's consider the growth of corporate after-tax profits since about 1950. You can see it in this FRED graph. It's on a log scale, so constant growth would be a straight line. There are lots of wiggles, but I see an increasing slope over time, and it's not an optical illusion.

There are a lot of ways to parse this. One is to connect the dip bottoms with straight lines. I've done that with alternating red and blue to show the slope increasing over time. The problem is selecting which bottoms to connect. Some alternate choices are indicated in yellow. The yellow lines define times of above normal profit growth: 1970 to 1980, 1986 to 1998, and 2001 through 2007. Each of them leads to a correction, indicated by a purple line across the top of the decline.

After I did all that, it occurred to me to let Excel throw an exponential best fit line on the data set, and you can see that as well.

I see now that I could have included another yellow line from 1961 to 1967. Notice that with each yellow line, the data set advances above the exponential best fit line before a sideways correction takes it below again. After the correction is complete, profits increase again until the best fit curve is breached. Or, they did until now.

Remember that on a log scale constant growth rate is represented by a straight line, and that the growth compounds, so that the underlying increase is exponential. Sooner or later, that has to end. Nothing in the real word can go to infinity. Here we see an exponential curve on a log scale. This demonstrates an increasing growth rate. Therefore, the underlying increase is greater than exponential. If exponential growth is unsustainable, what would you say about greater than exponential growth?

In fact, the whole trend might now be falling apart, as the last blue line has a much lower slope. Also, for the first time following a correction, profits have stayed below the trend line, and the gap is increasing.

To show the extent of national income capture by corporations, here is a graph of corporate profits as a percentage of GDP. I've divided the set into two segments: 1951 to 1979, and 1980 on, and had Excel place a linear trend line on each. This division is somewhat arbitrary, but almost every economic time series you can find has a break point within a few years of 1980. Division between '79 and '80 is the least favorable to my point that Profits/GDP had no trend in the post WW II Golden Age, but have trended sharply upward during the Great Stagnation period.

Profit/GDP growth was unusually poor from 1980 through 1986. Then from late 2001 through early 2006 it exhibited the greatest growth ever. But remember the denominator effect. Nominal GDP growth increased rapidly following the '80-'82 double recession; while GDP growth in this century has been generally slow. The financial melt-down of 2008 caused a dip that was sharp and brief, but the rebound has not gone to a new high. But even now, in the midst of anemic recovery, profit/GDP is hovering in the 9 to 10% range, far above historical norms.

CONCLUSION

The corporate profit growth picture looks unsustainable, and that is troubling. What it means for the future is anybody's guess. But, what we get from it is the first partial answer to the question, "Where has all the money gone?"

Gone to profits, everyone.

1/17 Update: Cross posted today at Angry Bear.

I Probably Wasn't Going To Do This Anyway . . .

2012-01-09T12:00:00.000-05:00

I've pretty much outgrown my need for an adrenaline rush. Not so this cute Aussie.

I couldn't find any way to imbed the vid. Please follow this link into crocodile infested waters.

Ron Paul Challenges Liberals - or Maybe Not

2012-01-09T11:19:00.000-05:00

Matt Stoller, the former Senior Policy Advisor to Rep. Alan Grayson and a fellow at the Roosevelt Institute has a couple of very interesting articles posted at Naked Capitalism, Why Ron Paul Challenges Liberals, and the follow-up, Naked Capitalism, “A Home for All Sorts of Bircher Nonsense”

These are thought-provoking, in many ways insightful, and strike me as required reading, for a variety of reasons, including some valuable historical insights. However, one thought they provoke from me is that the main thesis is spectacularly wrong-headed. Stollar talks about what a great ally Paul's staff was, when working on certain issues. I should say, "when working against certain issues" or things, like war and the unfettered evil workings of the Federal Reserve. The correct vocabulary is worth emphasizing. Liberals and Libertarians may find common ground in what they are against, but it is quite unlikely that they will ever find anything substantial that they both are for.

Stollar goes on to point out what he calls "a big problem" with liberalism. This is the mixture of two elements, support for federal power and the anti-war sentiment that arose with Viet Nam and has continued though today. In the same paragraph, Stollar says, "Liberalism doesn’t really exist much within the Democratic Party so much anymore." This is an important thought, but he doesn't pursue it, and as he goes on seems to conflate Democrats with Liberals, as suits his convenience. In the final paragraph of the first post he refers to: "a completely hollow liberal intellectual apparatus arguing for increasing the power of corporations through the Federal government to enact their agenda." Seriously, WTF? I have absolutely no idea what the hell that is supposed to mean.

The second article is especially weak, and essentially devoid of any intellectual content. Stollar decides to "highlight a few of the reactions here without much of a rebuttal." Why would anyone do that? Does he believe the reactions are self-refuting? Is he too lazy to rebut, or does he simply not have a good rebuttal?

At least he clearly sets forth the thesis of the first article: "that the same financing structures that are used to finance mass industrial warfare were used to create a liberal national economy and social safety." Here is the source of Stollar's alleged intra-liberal conflict, that Paul is somehow supposed to illuminate and inform. Though Stollar says: "I’ll be describing in much more detail the shifting of the social contract underlying this failure, which has nothing to do with Ron Paul and would exist with or without him." So referencing Paul in the first place was a bit of a red herring.

He then goes on to provide extended quotes from posts by David Atkins, who he describes as "wrestling with what liberalism is" and Digby, who he simply rejects out of hand, though with a lot of words that don't quite reach the level of snark

What Stollar describes as "contradictions within modern liberalism" boils down to liberalism needing big government to be interventionist, as Atkins demonstrates, but not imperialistic. But this is a totally coherent position. The problem lies not with progressive liberalism, but with the practical realities of managing a power system - which is what governemnt is - in a way that advances the common good, while holding the drive for imperialistic and domestic domination in check. This is going to be a central practical problem with any governing system or political philosophy - at least for one that takes seriously the idea of advancing the common good. To say it is the problem of liberalism is to ignore human nature, political reality, and the entirety of history.

Thus, a liberal can hold the positions that American involvement in WW II was necessary, but that our involvement in Viet Nam was not. Ditto Kosovo, vis-a-vis Iraq. One can also recognize that the only entity with enough heft to balance the power of trans-national mega-corporations is government, but Stollar does not choose to give that any consideration.

Stollar concludes: "As the New Deal era model sheds the last trappings of anything resembling social justice or equity for what used to be called the middle class (a process which Tom Ferguson has been relentlessly documenting since the early 1980s), the breakdown will become impossible to ignore. You can already see how flimsy the arguments are, from the partisans."

I don't know how one gets from the systematic dismantling of the New Deal by successive Republican administrations (and you can include both Clinton and Obama in this list) to the New Deal model shedding anything at all. And, no, I can't see how flimsy liberal partisan arguments have anything to do with an assault on the middle class that has taken place from the right.

Stollar has constructed a straw man problem. Which is a shame, since there are real problems to be dealt with. One is the growth of right wing populism, as exemplified by the Tea Party - at least to the extent that is is real, and not a Fox News fabrication. Another is to harness the energy of the Occupy Movements, which provide some evidence that there is progressive populism that could be a source of real political strength. Most critically, though, as things stand now, there is no political left in this country with any actual power.

Corey Robin describes the central problem of American liberalism in the 21st Century, and closes the loop back to Stollar's Ron Paul idea like this.

Our problem—and again by “our” I mean a left that’s social democratic (or welfare state liberal or economically progressive or whatever the hell you want to call it) and anti-imperial—is that we don’t really have a vigorous national spokesperson for the issues of war and peace, an end to empire, a challenge to Israel, and so forth, that Paul has in fact been articulating. The source of Paul’s positions on these issues are not the same as ours (again more reason not to give him our support). But he is talking about these issues, often in surprisingly blunt and challenging terms. Would that we had someone on our side who could make the case against an American empire, or American supremacy, in such a pungent way.

Digging a level deeper, the reason we don't have such a spokesperson is that our political system is essentially owned by corporate interests, which is why we get alleged liberals like Clinton and Obama in Democratic leadership, while genuine progressives like Bernie Sanders, Dennis Kucinich, and even Alan Grayson are marginalized. On top of this, the right has a vigorous and powerful propaganda machine - hence the Tea Party; and the small number of progressive voices in broadcast media is nowhere close to providing a balance.

Money owns politics, and corporate interests, along with a small entrenched elite, own the vast majority of the money. The key to achieving progressive solutions is to get the money out of politics. But in the wake of Citizens United, that prospect is a forlorn hope. That is my "coherent structural critique of the American political order" in one short paragraph.

Cross Posted at Angry Bear

A B Post

2012-01-04T08:30:00.000-05:00

My first post as an official member of the Angry Bear Team is up.

Speculation About Oil.

I'm not cross-posting here because the original draft was posted here back in May.

The new one is better.

New Writing Gig

2012-01-03T21:00:00.000-05:00

I'm delighted to report that I have been invited to write for Angry Bear - an assignment which I eagerly accepted.

I have several posts in place in this obscure blog that I intend to polish up and republish at AB.

There will also be fresh material from time to time, which I will likely cross-post here, when it happens.

Wish me luck on this new adventure.

Andrew Samwick Does Not Exactly Tiptoe Around the Rentier Issue

2012-01-02T09:16:00.000-05:00

Though he still doesn't quite confront it head on. Following up on the Delong post I cited here, Samwick says:

The larger context of Brad's post is to question whether the financial sector's increased share of GDP over the past six decades has contributed to economic growth. Given how much of the financial sector is no more socially useful than a casino, I don't see how that could be the case. Worse, the "house" and several of the "players" in this casino have used their growing resources to subvert our political institutions into believing that their institutions are "too big to fail."

Recognizing the casino aspect is valuable in its own right. The important next step is to recognize that these rentier activities are not only socially useless but overtly harmful.

I feel like a voice crying out in the wilderness.

Bellum Omnium Contra Omnes, or - The Life of a Coleoidean

2012-01-01T19:05:00.000-05:00

Beginning from a mechanistic understanding of Teuthidan beings and the passions, one may postulate, Hobbes-like what life would be deep in the ocean, a condition which we might call "the state of saline-aquatic nature." In that state, each Decapodiform would have a right, or license, to everything in the ocean.

In such condition, there is no place for industry; because the fruit thereof is uncertain: and consequently no culture of the ocean; only navigation, but no use, other than the immediately culinary for the commodities that may be comported by sea; no commodious building, save coral reefs; no non-tentacular instruments of moving, and removing, such things as require much force; no knowledge of the face of the earth beyond the edges of the sea; no account of time in the dark depths; no arts; no letters; no society; and which is worst of all, continual fear, and danger of violent death; and the life of squids, solitary, poor, nasty, brutish, and short.

References.

Ref 1

Ref 2

New Year's Sunday Music Blogging

2012-01-01T18:04:00.000-05:00

I can think of no better piece to usher out the travisty that was 2011 and invite in the potential disaster that 2012 may well turn out to be than Sequenza V, by Luciano Berio.

Here, it is performed by the incomparable Christian Lindberg.

I dedicate this post to the insane clown posse posing as the slate of Rethug presidential candidates.

Happy Apocalyptic New Year

2012-01-01T12:54:00.000-05:00

This was originally posted by the artist at the end of 2009, but NOW is the proper time for it.

Farming

2011-12-31T23:31:00.001-05:00

Marginally arable land, rural golf courses, and millions of acres in the federal Conservation Reserve Program are being farmed. Farmers are tearing down fences and structures and uprooting trees, to be able to get in a few more rows of planting. This is immediate dangerous to land and water, and unsustainable over time. Read about it here.

The force pushing more land into production is the rise in crop prices: in the past five years corn prices tripled and those for soybeans doubled because of swelling worldwide demand, including demand for ethanol production. At the same time yields have spiked because of genetically engineered crops and improvements in farming technology, which are also allowing farmers to grow in previously inhospitable areas.

I just read somewhere yesterday that 60% of the corn grown in the U.S. is a recently developed hybrid that is toxic to corn root worm. The high use rate is due to the resistance this hybrid offers, without requiring the use of pesticides. This is part of the reason for the high yields mentioned in the quote above. The downside is that the root worm - quite predictably - is developing resistance, and re-invading the corn fields. I can't find where I read about it, but you can read about it here.

Maybe my reptile brain is taking over and I'm getting needlessly alarmist. But I'm connecting these dots with a global warming dot. Unsustainable farming practices, failure of pest-resistant hybrids, and a changing global temperature pattern could combine to cause some sort of massive systemic failure.

What chance do you see for a major world-wide food crisis in 5, 10, or 20 years?

I think the chances are quite good that the outcome will be really bad.

Predictions

2011-12-30T22:29:00.001-05:00

Mish has predictions for 2012.

Some look good, and others look absurd. (Paul beats Obama?) Maybe I'll comment on them. Then again, maybe not. But I do want to keep the link.

Delong Tip-toes Around the Rentier Issue

2011-12-30T19:07:00.000-05:00

Via Thoma I see an article by Brad Delong that I would otherwise have missed.

Brad tells us that, "In 1950. finance and insurance in the United States accounted for 2.8% of GDP . . . Today, it is 8.4% of GDP, and it is not shrinking."

That is exactly a 3-fold increase, and correlates pretty well (as far as those two numbers take us) with the growth of the finance sector share of total corporate profits. Brad references Justin Lahart of the WSJ, who opines that this has “not, by and large, been a bad thing....Deploying capital to the places where it can be best used helps the economy grow...”

Which would be true, except that it's not. The finance sector share of profits has not been in a steady year-over-year increase. Instead, as can be seen in the chart at my link above, it oscillated around an exponentially increasing trend line, with sequentially higher highs, and higher lows. Notably, with only one exception (1986) every peak in finance sector grab lines up with a recession, all the way back to the start of the data set in 1947. Given these facts, the notion that capital is being best deployed looks a lot like a god-damned lie.

Brad is more polite - and more numerical:

But if the US were getting good value from the extra 5.6% of GDP that it is now spending on finance and insurance – the extra $750 billion diverted annually from paying people who make directly useful goods and provide directly useful services – it would be obvious in the statistics. At a typical 5% annual real interest rate for risky cash flows, diverting that large a share of resources away from goods and services directly useful this year is a good bargain only if it boosts overall annual economic growth by 0.3% – or 6% per 25-year generation.

Besides which:

Finally, better finance should mean better corporate governance. Since shareholder democracy does not provide effective control over entrenched, runaway, self-indulgent management, finance has a potentially powerful role to play in ensuring that corporate managers work in the interest of shareholders.

How well do you think that is working?

Overall, however, it remains disturbing that we do not see the obvious large benefits, at either the micro or macro level, in the US economy’s efficiency that would justify spending an extra 5.6% of GDP every year on finance and insurance. Lahart cites the conclusion of New York University’s Thomas Philippon that today’s US financial sector is outsized by two percentage points of GDP. And it is very possible that Philippon’s estimate of the size of the US financial sector’s hypertrophy is too small.

At this point Brad could have said something about the rentier activities of finance sucking the life blood from American capitalism. But we get nothing - even a single subordinate clause - on that topic.

Despite this missed opportunity, the article is well worth reading. Go check it out.

Say's Law and Ricardian Equivalence

2011-12-30T16:28:00.000-05:00

I'll admit I get a bit confused thinking about Say's Law and Ricardian Equivalence - which I never do, unless actually reading about them somewhere. But the kerfuffle between Krugman and Lucas has been pretty hard to ignore. (Each of them is confused as well - or not - depending on whom you chose to believe.) You can read about it in many places.

What Lucas said.

What Krugman said.

Econospeak

Macromania

Noahpinion

At Noah's place I launched into a reality based critique of Say's Law. Though it turns out not to have been quite Say's Law, after all. Like I said, this kind of B.S confuses me. Still, I think I've given a valid criticism of some aspect of conservative economic thought.

you can't get around Say's Law by taxing people in the future instead of today, because people are forward-looking and have rational expectations

If Say's Law were not invalidated for other reasons, it would absolutely fall apart here.

Have you ever heard anybody ponder what they would be doing with their money 5 or 10 years down the road if they didn't buy a big screen TV today?

Does anyone ponder relative poverty in their old age vs taking a vacation now?

To the extent that most people think about money at all, it's implicitly in terms of cash flow. Can I make the finance payments on this purchase and still afford to feed my cat? This is the real wold, which is apparently terra incognita to economists.

Plus, rational expectations is the silliest idea to be taken seriously since chemists gave up on phlogiston. People act from the cerebral cortex at least as often as they act from the neocortex. This gives us wars and the herding instinct, makes bubbles and Ponzi schemes so exciting, and enables all sorts of wildly irrational behavior, like voting for Republicans or believing in Ricardian equivalence.

Hale "Bonddad" Stewart also weighs in a Noah's place, with a link to a post where he dismembers Ricardian equivalence with empirical data. My kind of guy.

Update: Brad Delong chides Noah, and in the process of clarification, confuses me further.

Holy Coleoidea!

2011-12-28T15:16:00.000-05:00

I had a beautiful cephalopodian Bumpa-grandduaghter moment on Christmas (aka Cephalo-Festivus*) eve. Nine-year-old Samantha had requested a fish from Santa Claus. Her mom was adamant that no such fish would be forth-coming. (As an aside, it was revealed that Santa will only deliver animals of any kind with prior parental approval.) Sam was equally adamant the she was going to get her fish, and went around singing "I Want A Fish For Christmas," providing her own original lyrics to this tune.

Big sister Amanda (age 14) piped in, saying, "How could Santa deliver a fish?" Evidently, his sleigh is not properly equipped for transporting them.

"Well", I suggested, "think about how Santa gets from Scotland to Nova Scotia."

"He crosses the sea," Amanda replied, warily.

It was then generally - albeit reluctantly - agreed that he could at any random moment just swoop down and scoop a fish out from the drink. "Actually," I said, "I was thinking more of a squid."

The look of disdain on Samantha's face was worth the price of admission, all by itself.

Pressing on, I asked, "If you got a squid, what would you name it?"

After a moments thought, Sam replied, "Squidward." I thought that was quite good; but her dad interjected, "What about Squidney?"

On that cue, I started riffing about the squid's long, flexible tentacles. Middle sister Rebekka (age 11) was sitting next to me on the couch, and from the corner of my eye, I saw the light bulb go on over her head. We looked at each other and said, in perfect unison: "Squid don't have any knees." The infamous Bumba-Bekka mind meld was in full force.

Then we high-fived amidst the groans. It was fabulous.

After all that quieted down, I told Sam to call me on Christmas morning (but not too early) and tell me if she got her fish. (In my exalted position of bumpahood, I had some inside information.)

When the call came she was one excited little girl. Santa brought her an aquarium, and all the required accessories, along with a gift card to a pet shop, where she could choose her own fish.

That Santa - what a guy!

______________________________

* Find the explanation in comments here.

Six Reasons . . . Ron Paul

2011-12-27T14:45:00.000-05:00

Mish gives us six reasons to vote for Ron Paul. I am not making this up.

Paul is the only one for a balanced budget and a plan to get there
the only one who would bring US troops home immediately
the only one who would end the Fed
the only one who believes in the free market
the only one who believes gold should be money
the only one who would dismantle entire government departments

I see five good reasons NOT to vote for Ron Paul. In general, his thinking is about as nuanced as a sledge hammer - which is no more than what you can expect from a sociopath. Regarding item 2, Paul is only against war because it is an example of government spending. So, on the one thing he gets right, it's for the wrong reason.

What I will say for Paul is that (although he is every bit as capable of mendacity as any other politician) I do not doubt his sincerity and openness regarding his policy positions. What you see is really what you will get.

Unfortunately, what you see is somewhere between butt-ignorant and bat-shit crazy.

More Fun with FRED

2011-12-27T11:40:00.001-05:00

FRED:

I stumbled across data series AHETPI, Average Hourly Earnings of Production and Nonsupervisory Employees, starting in 1964.

If this has anything like the usual quasi-exponential curve shape one expects with time series data, it is with an awfully small exponent. Of course, on some scale, a curve segment can look like a straight(ish) line, but that just reinforces the point.

Here it is on a log scale.

Clearly, there are two regimes with starkly different growth rates. The break point, of course is in the early 80's.

For perspective, I plotted this curve along with series A576RC1, that we examined yesterday. That series is total salary and wage disbursements for the population, while this one is certain employees per hour, so I used A576RC1 per capita. Then, to get them on a comparable scale, I divided AHETPI by 1000. After all that, the ordinate values don't mean anything; it's the shapes of the curves that we're comparing.

This is similar to the mean vs median income data we've looked at before, and shouldn't be a surprise.

Let's look at how AHETPI has been affected by inflation.

Wow! Somebody could write a book about this chart, and maybe somebody should. For now, I'll just make a few observations.

For wage earners, the post WW II golden age really was golden, as real hourly earnings increased dramatically, peaking in 1973.

Then, except for a slight recovery after the '74 recession, it was downhill for 2 decades.

The steepest slide came during the late 70's, when inflation was high, and wage and price controls capped earnings increases.

Even after inflation was conquered, real wages continued to slide through the mid 90's.

The mini golden age of Clinton's second term looks pretty darn good.

Since then, it's been basically flat, except for an unexpected jump up during the great recession.

I'm trying to rationalize the jump up. Two things I can think of that might be operating are a) the selective elimination of lower paying jobs, and b) temporary deflation during the crisis. I'd welcome critical evaluation of these ideas, and any other suggestions to help understand this.

Update:

There was a brief dive into deflation during the financial melt-down.

Update 2: Meanwhile, see what Art has been up to.

The Republican Brain

2011-12-26T15:04:00.000-05:00

The Republican Brain is characterized as follows.

This brain controls body functions required for sustaining life, such as heart rate, breathing, balance and body temperature.

It is reliable, but tends to be cold, rigid and compulsive.

Behaviour relating to survival of the species, such as sexual behaviour, is instinctive and responses are automatic.

One of these instinctive reactions is to handle survival via the flight or fight response.

It is responsible for species-typical instinctual behaviors involved in aggression, dominance, territoriality, and ritual displays.

It is hierarchical, obsessive, authoritarian and aggressive, with paranoid tendencies.

When acting from these instincts, action is informed by neither though nor feeling.

Territory is acquired by force and defended. Might is right.

It does not learn from mistakes.

This, of course, is a description of the functions of the cerebral cortex, also known as the reptile brain. This is the most primitive region of the human brain. As evolution progressed, the limbic region, common to all mammals, was added. It enables learning, emotion, and the ability to make value judgments. Higher on the evolutionary scale, primates, including humans, have another added region, the cerebral neocortex. It enables language, abstract thought, imagination and consciousness.

It is not that Rethugs are totally devoid of limbic and neocortex functions; they are, after all, more or less human. Rather, it is the utter dominance of the cerebral cortex over the other two brain segments - in situations that matter the most - that impels me to refer to them as LIZARD PEOPLE.

And I do this based simply on empirical observation, without in any way invoking ancient Sumerian mythology, weird conspiracy theories, or, most emphatically, any combination of the two.

This post was inspired by my comment at Johnathon Bernstein's Blog, and results from a total inability this day to do anything even remotely constructive.

UPDATE: Thanks to Couves, commenting before and after me at Bernstein's, we learn that Donald Rumsfeld had a point-blank opportunity under direct questioning to deny that he is a lizard, and he wouldn't do it. This is around the 3 minute mark at the link. Make of it what you will. Of course, my mind was made up before I received this new gem of knowledge.

References:

Reptilian vs Mamillian Brain

THE EVOLUTIONARY LAYERS OF THE HUMAN BRAIN

Triune Brain.

Jesus So Loved the Rich

2011-12-26T12:48:00.000-05:00

I'm not a religious man, but occasionally I'll attend church service with family members who are considerably less heathen than I. So it went on Christmas Eve, when the Lutheran pastor made rather a big deal about the baby Jesus. Well, why not? Tradition has it that this is his birthday, belief has it that he was God made flesh, and the whole salvation story revolves around this event.

And the circumstances into which Jesus was born are more than just detail and literary setting. To a large extent, the entire Christian ethic builds on a foundation of the specifics of the birth of Jesus.

That's why it is really import to remember that Jesus, of the royal house of David, was born in the palace of Herod, amidst the wealth, pomp and splendor that befits one of his station. His mother was surrounded by ladies in waiting. His father was feasted by the royalty in attendance. The new-born baby was exulted above all, and celebrated by the population as they welcomed the dawn of a new era.

So that this early message would not be lost, Jesus reinforced the idea of God bestowing his favor on the rich and powerful by all the actions of his adult public life. These events stand out in particular.

Driving the beggars away from the Temple so that they would not annoy the money-changers, whom Jesus loved above all.

Healing the sick - but only among the elite, who alone were able to afford -or, to be sure, were even worthy of - his ministrations.

Traveling in splendor throughout the countryside, demanding homage from the poor, downtrodden and dispossessed, while seeking the company of and giving wise council and precious gifts to wealthy merchants and powerful politicians.

Demanding compensation in the form of loaves and fishes from the poor, unwashed masses who wished to hear him preach on a mountainside.

Matching word to deed, Jesus frequently reminded us that salvation is for those blessed with money and power, and thus able to buy their way into eternal paradise. Most telling was his statement that it was easier for a camel to pass through the eye of the needle than for a poor person to get into heaven.

Thus has it ever been: the meek are downtrodden, while the rich inherit the earth. Who can doubt the wisdom Jesus displayed in his choices of business partners, companions, and life style.

On the other hand, though, I guess it also explains why the common people demanded his death. Why his rich friends allowed it to happen remains one of the great mysteries of faith.

Wandering with FRED - Wages

2011-12-26T11:59:00.000-05:00

Wandering through the FRED databases this morning, I took a look at series A576RC1, Salary and Wage Disbursements, which starts in 1959. This journey was prompted by comments to this post by Noah.

Observations:
1) The same quasi-exponential curve shape one sees in lots of economic time series data. This is simply more-or-less regular growth. The interesting stories are in the irregularities.
2) Noticeable flat spots during recessions.
3) Effects of recessions seem to be getting greater with the passage of time: longer flats, lingering loss of slope; i.e. increasingly anemic recoveries, as measured by compensation.
4) The recent great recession has been particularly dire in its effects.

With this kind of data series, it's often helpful to look at it on a log scale. Remember, on a log scale, an upward sloping straight line indicates a constant rate of growth, with the steepness of the line determined by the growth rate.

Observations:
1) The line breaks in the early 80's, around 2000, and again in the Great Recession of 2008.
2) Each of these leads to slower growth in total worker compensation.
3) The current slope is extremely gentle, though that word feels distinctly oxymoronic in context. This is close to zero growth.

We're looking at total wage and salary outlays. FRED allows all sorts of data manipulations, so lets look at it per capita. For this I divided by FRED series CNP160V, Civilian Non-institutional Population. I also adjusted the time scale, starting at 1955 instead of 1950 to get rid of some wasted left side space.

Observation:
Adjusting for population growth doesn't change the shape of the curve in any substantial way, probably because population growth has been relatively constant over the period. Or, perhaps, there is something subtle that I am missing.

Here is how it looks adjusting for inflation, FRED series CPICAUSL.

Observations:
1) This is a lot more interesting: big loses in recessions, slow growth overall during the stagflationary 70's.
2) Anemic recovery from the Great Recession, actual flat line since.
3) Strong growth during the late 90's.

This makes me wonder how it looks per capita, inflation adjusted.

Observations:
1) Adjusting for both population growth and inflation is very revealing. Real Wages Per Capita (RWPC) churned through the 70's with the result being a net loss.
2) Recovery through the 80's barely brought RWPC to a new high.
3) RWPC plateaued, then slumped.
4) Robust growth through the 90's led to a meaningful new high.
5) Steep declines in both of this century's recessions.
6) Despite a marginal new high just before the Great Recession, the clear trend this century has been down.

Meanwhile, income and wealth disparity has reached historically high levels, and corporations are raking in record profits.

Remember, these numbers are total compensation, so they include whatever is being made by CEO's and rentiers in the finance sector. Don't forget about the differences between mean and median income.

Looks like we've been getting screwed for decades.

Feelin' Grinchy

2011-12-23T23:55:00.000-05:00

My arrangement of Mr. Grinch.

The Christmas Song

2011-12-23T23:52:00.000-05:00

My arrangement of the Christmas Song by Mel Torme.

Merry Christmas.

What the Hell?!? Friday - Spin(?)

2011-12-23T06:00:00.000-05:00

Spin -- Illusion or Reality . . . Does it matter?

Mark puts this optical oddity into a real world context. Check it out at his place.

GDP Revised Down

2011-12-22T16:52:00.000-05:00

Here is the report from BEA. Annualized, the growth rate for the 3rd quarter was revised down from 2.0% in the 2nd estimate to 1.8% in the third estimate. Real GDP increased at a rae of 1.3% in the 2nd quarter.

This is significantly below the normal historical growth rate, and absolutely dismal in what is supposed to be a recovery. It gets worse, though. The population continues to grow irrespective of what the economy is doing. The estimated population growth for CY 2011 is 0.963%. That's a lot if implied precision for an estimate, but who knows, maybe they're just that good.

Consider GDP/capita - the average slice of the American economic pie. That rate of growth is 1.018/1.00963 = 1.00832. So - the growth rate of real GDP/cap is a lousy 0.832%.

Meanwhile, as national wealth per cap growth is less than a single digit, CEO salary increases are deep into double digit territory, with a median of 27% for U.S. companies in general, and a whopping 37% for companies in the S and P 500.

"Wages for everybody else have either been in decline or stagnated in this period, and that's for those who are in work," Paul Hodgson, a senior research associate at GMI, told the Guardian. "I had a feeling that we would see some significant increases this year. But 30 to 40 percent was something of a surprise."

John H. Hammergren of healthcare company McKesson Corp. was the highest-paid CEO in 2010, taking home $145.3 million in compensation, the LA Times reported. His base salary of $1.6 million was supplemented by more than 3.3 million exercised stock options, which earned him a profit of $112 million.

Three of the ten executives with the biggest pay packages were in the healthcare industry, while another two were in real estate, MoneyWatch reported. Four CEOs on the list retired or were let go last year, pumping up their pay with severance or stock sales on the way out, the LA Times reported.

Now that is interesting. Healthcare is in crisis, but the CEO's rake tens of millions off the top while health care related expenses cause more than half of all personal bankruptcies. CEO's get fabulously wealthy in real estate, while millions of people are under water in their mortgages. Topping it off is the practice of rewarding failure with enormous monetary payouts.

Does anyone see a disconnect here?

Don't you think this might be a part of why we are so badly screwed?

Dancing From Aisle to Isle

2011-12-22T15:12:00.001-05:00

My Filipino friend Patricio posted this on Facebook.

MANILA, Philippines (AP) — Who says plane travel can't be fun?

Flight attendants for a low-cost Philippine airline who gained fame by dancing through safety demonstrations are back swaying through the aisles.

They've swapped the Lady Gaga tunes that made them popular last year for Mariah Carey's "All I Want for Christmas Is You."

Manila-based Cebu Pacific airline says the choreographed dance helps passengers pay more attention to the safety demonstration.

For sure. Here is their routine from last year.

Chicago Fed Index Declines

2011-12-22T15:01:00.001-05:00

Calculated Risk presents the November Chicago Fed data on their economic activity index. "A zero value for the index indicates that the national economy is expanding at its historical trend rate of growth; negative values indicate below-average growth; and positive values indicate above-average growth."

The index dropped from -0.11 in October to -0.37 in November - a trivial change, but directionally unfavorable. Last quarter GDP growth has also been revised down from 2.0 to 1.8%. If this is recovery, it is very anemic.

Here is the CR graph of the data. I noted almost two years ago that this index traces a line pretty similar to quarterly GDP growth. The slopes are a bit different, and the trend lines aren't parallel, but general contours are similar, and the peak/valley timing lines up quite well. Here is a graph of quarterly growth in real GDP that I posted in May.

So far, this has not been a good century, and there's little reason to believe it's going to get much better any time soon.

Fed Policy Failure As Root Cause

2011-12-22T13:22:00.000-05:00

I decided long ago to not read Scott Sumner, but I'm not bigoted about it. Karl Smith directs us to this post by Sumner, in which he does a clever personal riff on a Wittgenstin quote.

In the context of the great recession we are still enduring, Sumner uses this to blame the Fed. He says this in comments to his post, at 14:13 on 16 Dec,. re: the Fed.

They intervene every second of every day. They control monetary policy and hence NGDP.

And this:

The crisis of 2008 was caused by tight money at the Fed. They deviated from their normal dual mandate in September 2008, and it was all downhill from there.

There is probably a good argument that the Fed was following tighter policy than they should have around that time - and quite possibly had been for a considerable while. But the view that monetary policy is omnipotent seems awfully one-dimensional to me. I cite the inability of QE money to spur the economy - it has mostly wound up in excess reserves. This view also implicitly dismisses the idea suggested about 20 minutes earlier by commentor Donald A Coffin, that capitalism has some level of inherent instability -- which Sumner simply shrugged off.

The idea that that the Fed is intervening during seconds, hours, days and weeks on end, when they make no policy decisions at all seems to be a reach too far.

The really striking thing, though, is the accusation that that the Fed made a policy turn in September, 2008. Does anybody have a clue what they might suddenly have started doing differently?

Later in comments, flow5 says:

That’s not exactly what happened. Bernanke tightened MVt for 29 consecutive months. The Case Schiller housing index peaked @189.93 when Bernanke initiated his tight money policy. Based upon the FED’s technical criteria (interest rates), the 4th quarter contraction in 2008 was already “set in stone” beginning in Jan of that year. I.e., the Fed’s failure to prevent NGDP from falling started long before the economy collapsed.

In the midst of all this, what I find most puzzling is Sumner's insistence that a market in NGDP futures contracts will lead to stable levels of NGDP. This is the highest order of dog wagging I have ever seen suggested to any tail.

How Important Is Hayek?

2011-12-20T20:26:00.002-05:00

Art reminds us of one of Krugman's posts from a couple weeks ago, with this PK quote:

"David Warsh finally says what someone needed to say: Friedrich Hayek is not an important figure in the history of macroeconomics."

PK goes on to point out that Hayek's current relevance is almost purely political rather than economic, with the implication that it is a distorted view of Hayek that the current crop of right wingers uses to oppose anything that smacks of progressivism. Warsh, in the link above, is more blunt, or as PK puts it, "cruel."

To be clear, this bluntness and/or cruelty is not leveled at Hayek himself, but rather at those who would self-servingly re-animate him as a conservatard caricature.

Warsh: "But the claims conservatives are making about the role he played as an economist are beginning to smack of Ruizismus. That is, they have jumped a caricature out of the bushes late in the day and claim that their guy ran a great race."

Warsh took a lot of heat in comments - which he accepted with almost saintly forbearance - from right wingers who misread his post. These are not stupid people. Their misreading comes from ideological blindness - an insidious form of self-induced, willful ignorance.

My comment at Warsh's place, from earlier today:

I’m later than late to this post, and took the curious route of reading the comments first. That made the post itself quite a revelation. Having no dog in this fight, it’s pretty easy for me to see that it is far from the hatchet job that several other commenters imagine it to be.

It’s not clear whether the point is to damn Hayek with faint praise or to praise him with faint damnation. But there is some attempt at balance, and it is clear that accusations of ad hominem are rising from fevered imaginations. An unbiased reader will note that mention of Hayek’s divorce was in the context of “Thereafter he labored under five distinct handicaps,” which is actually giving him a bit of cover for decades of relative obscurity.

Re: the n-gram chart, (linked in comment 24 by Paul Wolfson) it’s easy for an objective observer to note that Hayek had gone absolutely nowhere for 30 years before his Nobel reception tickled a modicum of interest. Then Reagan/Thatcher supply-side-ism – however irrelevant – gave him a boost, for about a decade. Since then, even with Beck’s hucksterism, it been flat-line, at best, for well over a decade.

The decline of Keynes and Friedman over that same span may well reflect the general dumbing-down of practically everything in a sound-bite age dominated by professional liars like Gingrich, Limbaugh and Murdoch’s entire stable, and dim-wits like Paul Ryan, Michelle Bachman and Rick Perry.

Even in his grave, poor Keynes has been ad-hominem-ed to death. More so that any other currently dead economist. Well, except for Marx.

So – are we screwed, or what?

Of Health Care and Insurance Redux

2011-12-17T10:40:00.000-05:00

Just a year ago today I spelled out why for-profit health care insurance is an inferior model compared to single payer or socialized medicine. Today, Krugman revisits the issue. He links to yesterday's article by Ezra Klein, where Ezra naively says: "But the CBO is in the right here: No matter how much sense competition makes in theory, no matter how obvious it is that it will drive down the price of health care, the fact is that it keeps failing when we put it into practice."

Ezra totally misses the main point: competition makes no sense at all in theory, and can only drive costs up. The failure in practice is the result that should have been expected by anyone who had devoted as much as 5 minutes objective thought to the issue. He goes on to show specifically how it hasn't worked in the real world.

Krugman continues:

Why doesn’t the market work here? Ken Arrow explained it all half a century ago. Patients by and large don’t have the information to evaluate medical treatments; in any case, they mainly buy insurance rather than medical care directly; and insurers profit not by providing the most cost-effective care, but by trying to insure people who won’t need care.

The red highlighted section briefly summarizes part of my argument. The Arrow link is to a 33 page PDF file.

Clearly, the brute economics of heath care refute models proposed by right wing ideologues. There is another aspect to this, though - health care is not merely "a commercial transaction." Decisions are literally life and death, frequently made under emotionally trying circumstances, the Dr. - patient knowledge disparity is wildly assymetric, and opportunities for over-care and conflict of interest abound.

As PK put it:

The idea that all this can be reduced to money — that doctors are just “providers” selling services to health care “consumers” — is, well, sickening. And the prevalence of this kind of language is a sign that something has gone very wrong not just with this discussion, but with our society’s values.

And for this wrongitude we can specifically and directly thank the lizard people.

Trend Line Failure and The Housing Bubble

2011-12-14T13:18:00.001-05:00

Back in 2005, Very Serious People like Alan Greenspan were assuring us that there was no housing bubble.

" . . . Although we certainly cannot rule out home price declines, especially in some local markets, these declines, were they to occur, likely would not have substantial macroeconomic implications.

Well, hindsight is always 20/20, but one can make a very good case that housing prices up until just about the very moment of Greenspan's infamous prediction were bubblicious, indeed.

Here's the evidence*.

This graph shows year over year rate of change in home prices. First, I'll suggest that a 12% YoY increase in anything, anywhere, any time is unsustainable. Hence the late 80's - early 90's housing decline, which I have labeled a crash. But that crash was not much - a brief excursion into negative territory followed by a few years of relative stability. After the mid-90's things got interesting - for a decade, or so. I've placed a lower trend line (red) connecting the bottoms, and a parallel (red) line more-or-less cross the tops. This data doesn't fit this channel neatly, though, so I've also place a purple line that fits better across the tops.

The ultimate peak is then at the expanding channel top or an overshoot, depending on how you chose to think of it. Then in '06, the RoC line crashed through the lower trend channel boundary. That looks like a sharp V recovery, but we'll have to see how sustainable it is. With unemployment remaining stubbornly high, lousy paying jobs replacing better-paying jobs, and increasing wealth and income disparity, it's hard to imagine what could drive a robust recovery. I suspect the recent drop back below zero will be an important part of the story for several more years. The backlog of foreclosures has gotten worse, not better, and until that clears, housing prices will remain stagnant, at best.

Back to the bubble - I'm going to suggest that when the YoY % change in the price of anything is in double digits and increasing, that is indisputable evidence that there is a bubble in that item. No other confirmation is needed. Even the decline in the '01-02 recession only brought the RoC down to about 8% - and that was brief. By 2005, it was exceedingly clear that there was a housing bubble. Greenspan is either a fool or a tool - quite possibly both.

There is also a lesson here about trends. When the channel is broken in a convincing way, that trend is done. Forever. Whenever it is spoken of in the future, it will be as an item from the past.
______________________________________________

* Steve has a post containing the original version of this graph, and points us to a post by Tyler Durden at Zero Hedge that has several more. Those posts aren't about the housing bubble, per se, but rather about how Wall St. is sucking money out of ordinary peoples' pockets, and thus the economy in general.

These are examples of more rentier activity, and detrimental to society.

We're screwed.

Rats!

2011-12-13T22:11:00.000-05:00

As a fitting follow-up to this exchange with Tux, Hartmann shows us why rats are more highly evolved than Repubicans.

Link.

So, on the empathy scale we have Rats > Insane Clown Posse > Rethugs.

Seems about right.

Corporations United

2011-12-13T09:52:00.002-05:00

Bernie Sanders on America, The Constitution and the buying of elections.

YouTube link.

H/T to the LW.

Busy

2011-12-12T23:31:00.003-05:00

I will posting very little - if at all - for the next week or so. This is the busiest week of the year for me.

Quote of the Day

2011-12-11T09:44:00.001-05:00

In comments here I asked BT if there was a difference between the current slate of Rethug presidential candidates and an insane clown posse. His response:

Jzb, yes there is a difference. An insane clown posse has greater chance of having actual empathy for fellow human beings than the current crop of Republican lizard people from planet Sociopath.

Saturday Hopeless Blogging

2011-12-10T08:50:00.001-05:00

European style, via Peter Dorfman.

Absent a miracle, Europe is sliding into a recession. This will affect Germany as much as the weaker countries, even more considering its dependence on Eurozone exports. (Germany suffered an exceptionally sharp contraction post-Lehman too.) The result will be a risk of debt deflation in all markets. The sovereign debtors will again face default as public revenue dries up. Speculative assets like real estate will resume their decline. Overleveraged financial institutions—and Europe is the world leader in overleveraged finance—will need to be bailed out.

Elizabeth Warren

2011-12-09T23:35:00.001-05:00

I approve of her message.

Another H/T to the LW, who is on quite a roll tonight.

Bernie Sanders Petition

2011-12-09T23:23:00.001-05:00

To Support the Saving American Democracy Amendment.

Sign the petition here.

Sen. Bernie Sanders has proposed a constitutional amendment that would overturn the Supreme Court decision in a case called Citizens United vs. FEC.

The Saving American Democracy Amendment states that:

Corporations are not persons with constitutional rights equal to real people.
Corporations are subject to regulation by the people.
Corporations may not make campaign contributions.
Congress and states have the power to regulate campaign finances.

I signed, and if America means anything to you, you should, too.

Oooh, I loves me some Bernie.

H/T to the LW.

Friday Hopeless Blogging

2011-12-09T15:31:00.001-05:00

Can't say off the top of my head if I've ever given Mish a H/T. He get's one today for this vid.

Here is an older version the ECRI leading indicator graph that flashed by pretty quickly in the Vid. The last couple of years aren't shown, but if you were sharp-eyed, you saw the downward trend since the anemic post-trough peak.

Mish goes on to riff a bit on ECRI's many imperfections. So - add salt, chipotle, and other flavorings to taste.

I'm pessimistic for my own reasons, of course, and have been for a long time. GDP growth has not been in anything like recovery mode at any time in this century. Unemployment remains high, and what job growth we see is mostly in low-pay sectors. Housing prices in many places probably need to decline another 20%, at least, to reach market clearing values. Wealth disparity, wrong-headed unwillingness to tax, and lax regulations have put us into a low-to-no growth box. Private debt is a choking burden.

The Rethug controlled congress (yes, Virginia, they control the Senate too, with their filibuster-addicted, obstructionist minority) has as it's stated goal making Obama fail. Taking the country down is of no consequence to these traitorous bastards.

What The Hell?!? Friday - Revenge of the Gay Heathens

2011-12-09T11:24:00.001-05:00

In comments to Obama's War on Religion, Lynne points us to this snarky smack-down.

Obama's War on Religion

2011-12-08T13:12:00.001-05:00

"Liberal attacks on our religious heritage?" I can't tell which is the greatest - his stupidity, his insanity, or his belief that we are all crazy and stupid. Then, again, maybe he just wants to capitalize on our collective ignorance.

Seriously -- WTF?!?

H/T to LGM.

Update: What makes it even more disturbing is that now he claims to be off his meds. (But is somehow grateful for stem cell research. Go figure.)

Misreading a Trend

2011-12-07T21:36:00.001-05:00

At CR, one of the readers sent in a chart of the employment to population ratio, ages 16 and up. That reader expects the ratio to increase to 65%, based on his view of the trend line. Here is the post and here is a screen shot of the chart.

Bill McBride at CR says: "I think this forecast is incorrect - and this gives me a chance to discuss the participation rate and employment-population ratio."

He goes on to give fundamental reasons for why he disagrees, and every bit of that is right. You can also say that the forcast is incorrect just by taking a look at the trend. Sorry the picture got fuzzy when I grabbed it. The screen shot linked above should be crisp.

I'm not at all sure that the dotted trend line has any validity at all, but let's just go with it - or at least with a channel that is close to parallel to it, outlined in green. The data line tops out at about 64.5% around 1999. After a secondary peak around 63.5 and 2007, it's been a near-vertical drop. The smash through the bottom of the channel - which I've placed a low as is reasonable - is dramatic and convincing. It's been quivering just above the 58% level for a couple of years, now.

It seems quite plain - I would say self-evident - that the old trend has been broken.

Calculated Risk has a follow-up post on employment to population, broken down by age group. McBride concludes: "Forecasting the participation rate is important (along with population growth and other factors) in projecting how many jobs are needed to bring the economy back to full employment So I'll be writing more about this ..."

Food Stamps

2011-12-07T16:51:00.001-05:00

Mish provides a chart on food stamp usage. Here's a screen shot.

The most recent recession, that allegedly ended in 2009, is like nothing in living memory, unless you're a keen minded octogenarian. Mish's reader, Tim Wallace, provided the graph, and an extrapolated estimate that the number of people on food stamps will rise from the current 46 million to about 51 million by 2013.

Extrapolations are dicey, and a linear extrapolation of a clearly non-linear function doubly so.

However that turns out, this does indicate that we are living in strange days.

Wallace notes: "that food stamp usage sloped down throughout the Reagan presidency until it started back up in 1989, ahead of the recession that doomed Bush I, then continued for several more years." That drop was from roughly 22 million in 1981 to 18 million in 1988 - about 570,000 per year. Under Clinton - not mentioned in Mish's excerpt from Wallace's e-mail, usage dropped from roughly 27 million in 1994 to 17 million in 1999 - about 1.67 million per year.

I don't know if either of them was trying to make a political point, but I sure am.

The unknown here is how requirements to recieve food stamps might have changed over time. Did anything happen on that front during the Reagan years?

Update: In comments to this post, Jerry Critter does the leg work on the Reagan question. I've lifted his comment up to here.

According to Wikipedia "[m]ajor legislation in 1981 and 1982 enacted cutbacks" and "[r]ecognition of the severe domestic hunger problem in the latter half of the 1980s led to incremental expansions of the FSP in 1985 and 1987".

So, Reagan reduced the program and then was forced to expand it again because of too many starving people. At least he recognized his mistakes and tried, even if it was half-hearted, to correct them. He also raised taxes after first cutting them, again recognizing a mistake.

Today's republicans just say "Screw you".

Update 2: Here's a NYT article on the history of food stamp usage. And here is an Aug 1, 1981 article on the Reagan budget cut that affected the program.

Quote of the Day: "Brainwashing In The Most Obvious Form"

2011-12-06T15:08:00.001-05:00

Thus sayeth the lovely Andrea Tantaros, with the typical conservatard tone deafness to (or hyperactive sense of - it's really quite hard to tell) irony.

OK, I guess that explains why flaming liberals like Eric Rauchway and - well - I are big Muppets fans

SoBe puts it in perspective and provides thoughtful analysis.

Before watching this trailer for the obvious brain washing movie, you probably should ask impressionable children - and childish adults - to leave the room.

What are the Core Issues . . .

2011-12-05T08:41:00.001-05:00

For a man who doesn't seem to have a core?

Quote of the Day: "The Blueprint for Modern America"

2011-12-04T14:23:00.001-05:00

In some of my more cynical moments, I think that, when the south seceded from the Union, President Lincoln should have just said, "The hell with them. Let 'em go. Who needs them, anyway?"

This would have been (and I am deadly serious) very good for the rest of us, but really, really bad for the south. (If you think I need to elaborate, you need to give this some serious thought. Hints: beneficiaries of federal programs (like TVA and rural electrification), net gains from federal taxation, locations of military bases, whatever social progress Selma, Alabama has reluctantly been dragged into.)

Even before the civil war, the south was a huge impediment to progress. The 37th congress - the first to convene without southern representation, due to the secession - "did more than any other in history to change the course of national life. As one scholar has aptly written, this Congress drafted “ 'the blueprint for modern America.' ”

More than just a H/T: Steve elaborates.

A Different Look At The Great Stagnation - Pt 2

2011-12-04T11:51:00.001-05:00

For part 1, see here.

THE GOLDEN AGE AND THE GREAT MODERATION

The golden age was a period of strong, but sometimes erratic, economic growth. To illustrate this, consider the quarterly rate of change since 1947 in gross domestic product (GDP.) GDP is an aggregate measure of all the goods and service produced in the country. It’s not perfect, but it is a reasonable barometer of the state of the economy, and growth rates tell you where it is headed. The Bureau of Economic Analysis (BEA) provides relevant data in many forms. Graph one is a data plot of quarterly percent change from the preceding period in real (inflation adjusted) GDP, seasonally adjusted at annual rates, from BEA. This plot is color-coded by presidential administration, blue for Democrats, and Red for Republicans. As you can see, this number jumps around a lot, but less so in recent decades. Also shown are the average values for all data from 1947 through 1980, 3.73%, in green, and the average from 1981 through the first quarter of 2011, 2.81%, in red. Note that since 1981, average GDP growth has been almost a full percentage point lower than it was during the Golden Age.

Also shown is an 8 year moving average in yellow. I chose an 8 year span for the moving average to smooth out over the length of a two-term presidency, but any long moving average will tell the same story. Until recently, the lowest dip in that (moving average) line bottoms out at 2.35% in 1982, and the highest bottoms out 2.71% in 1986, with no particular pattern across time. The lowest bottom of all occurred in the recent Great Recession, bottoming out at 1.54% in the second quarter of 2009. The dramatic change is in the tops. After a broad double peak from 1966 to 1969, topping out at 5.39% and 5.29%, the remaining peaks are between 3.99% and 4.07% - scarcely above the golden age total period average. The other notable feature is the steady decline in quarterly data peaks throughout the G. W. Bush administration and the corresponding slide in the eight year average, culminating in the crash of 2007.

Figure 1

During the Great Stagnation, the reduced volatility in the quarterly GDP growth numbers appears in the graph as generally less severe bottoms, and even more dramatically as less expansive tops. The degree of volatility can be precisely determined using the statistical technique of standard deviation. The next graph shows how the standard deviation has changed since WW II.

Figure 2

The blue curve is the standard deviation (Std Dev), based on the previous 34 quarters. We’ll get to the red line later. Sure enough, the Std Dev falls over time, as the blue best-fit trend line confirms, but it does not fall monotonically.

How can we account for this? In the 50's, there was economic turmoil, as the economy restabilized during the first wave of the baby boom, and about 7 million soldiers reentered the work force following WWII - which came hard on the heels of the Great Depression. This was a dynamic time, with wild growth peaks in 1950, '52, and '55, along with recessions in 1953, '58, and '59-60. Then came the First Little Moderation - a decade with steadier GDP growth and – most significantly, no recessions until late in 1969. The 70's brought stagflation, the end of the Viet Nam war, and another series of wild gyrations in GDP growth - though, except for one spike in 1978, and the recession of 1980 - not as wild as the '50's. Reagan's high spending and deficits held recessions at bay after 1982, and volatility began to decline a few years later. After a modest peak in late 1987, GDP growth declined as well, and the resulting recession contributed to denying George H.W. Bush a second term. The Clinton administration gave us relative prosperity, along with the Second Little Moderation – another multi-year span without a recession. Volatility remained steady at a low level throughout his two terms, before dropping further to an all-time low in 1999. Despite this, his policies were too conservative to rekindle anything like a golden age. By 2000, the wheels were about to come off the Clinton boom anyway, but the grotesque economic policies of the George W. Bush administration threw us farther over a deeper cliff than was necessary. His profligate spending made Reagan look prudent, and gave us an anemic and declining series of GDP mini-peaks, culminating in the crash of 2007. Barack Obama’s administration has not been able to foster significant growth and a robust recovery while dealing with a Congress dominated by blue dog Democrats and overtly obstructionist Republicans. It’s particularly interesting that the recent Great Recession barely registers as a blip on the blue line.

Which brings us to the red line in Fig 2: relative standard deviation (RSD), determined by dividing the standard deviation by the average of the same 34 data points, here multiplied by 3.5 to put it on the same scale as Std Dev. Part of the reason that the Std Dev became smaller over time is that the numbers used to calculate it were smaller. To this extent that this is operating, the Great Moderation is a meaningless data artifact. However, if this were strictly true, the best fit line for RSD would be exactly horizontal. It’s not, but it does have a smaller slope than does the best fit line for Std Dev, so the idea is not totally without merit. Let’s have a closer look.

By the end of the first Little Moderation, RSD dropped to a level below that of most of the Great Moderation. It then rose slightly, was stable from ’71 to ’73, and took a big jump with the recession of ’74. After slipping over the rest of the decade, RSD shot to an all time high during the recessions of ’80 and ’82. The big drop occurred between ’87 and ’90, and the low level was maintained until the Great Recession.

Volatility is the intensity of variability. Big changes in short time spans register as volatility, causing Std Dev and RSD to increase. As figure 1 shows, the biggest variations come from recessions and quick, strong recoveries. There were three recessions in the 50’s so RSD never had a chance to decline. The 60’s and the 90’s were both recession-free, so RSD could decline in the one case, and stay low in the other. The recessions of the 70’s were deep, but the recoveries were strong, so volatility climbed. The back-to-back recessions of ’80 and ’82, with sharp recoveries in ’81 and ’83 took RSD to an all-time high. The Great Recession propelled RSD back up to a level not seen since the 80’s. Simply, all of the volatility jumps can be explained in terms of recessions. Avoid recessions, and Std. Dev. will be low.

How, then, do we explain the two Bush administrations, with their recessions in 1990 and 2001, but no jump in volatility? In each case the fall into recession was not sudden – it followed several months of low or declining GDP growth. Similarly, in each case, the climb back out of recession was slow, faltering, and failed to generate even a single quarter where GDP growth topped 7%. In contrast, from WWII until 1983, top recovery quarters typically exceeded 10%.

What this indicates is that the Great Moderation really is a data artifact – though not quite in the way I expected. Reduced GDP growth numbers play a part, but the real key is understanding how recessions contribute to observed Std Dev. Recession-free times have low Std Dev values, and tepid recoveries from recessions that occur in a low growth context will also have low values. While the Great Moderation is real, the standard explanation is inadequate, and comes from failing to look at the data with a critical eye.

________________________________________________

This was intended to be a chapter in a multi-author book project. The project fell through for reasons not related to the project itself.

Quote of the Day

2011-12-02T22:05:00.001-05:00

Michael Hudson: (Somewhat ironically, that link was broken. Here it is.)

In more modern times, democracies have urged a strong state to tax rentier income and wealth, and when called for, to write down debts. This is done most readily when the state itself creates money and credit. It is done least easily when banks translate their gains into political power. When banks are permitted to be self-regulating and given veto power over government regulators, the economy is distorted to permit creditors to indulge in the speculative gambles and outright fraud that have marked the past decade. The fall of the Roman Empire demonstrates what happens when creditor demands are unchecked. Under these conditions the alternative to government planning and regulation of the financial sector becomes a road to debt peonage.

This powerfully reinforces what I said here and here (including the comments.) Here, too. Also here. Check also the Mike Kimel and Andrew Dittmer links here.

H/T to Art.

Journeys into a Libertarian Future

2011-11-30T13:03:00.001-05:00

Brought to you by -

Mike Kimel at A.B.

Andrew Dittmer at N.C.

Commenters at both places mention similarities to feudalism. Right up my ally, of course.

Here, at no extra charge, is my view of libertarian quasi-feudalism.

Quote of the Day

2011-11-29T17:41:00.001-05:00

A rather long one from Hale "Bonddad" Stewart, with a H/T to A. B.

Let me address the political problem, because I think it's the really big elephant in the room. The Democrats can't lead. Period. The president sends a proposal to the Republicans and then offers the "pre-compromised" version before negotiations get out of the gate. He has yet to figure out that he is hated -- as in really hated -- because of what he symbolizes: the end of the WASP power structure as we know it. And Congressional Democrats have no backbone. Case in point: perennial pain in the ass Joe Lieberman should have been given an office by the janitor (with an apology to the janitor) along with every meaningless committee assignment possible. Instead, he's a media darling.

Republicans now have the luxury of living in a fact-free world thanks to Fox news and talk radio. Ever wonder why a mere 6% of scientists consider themselves Republicans? Because Republicans are now completely fact-free in a majority of their statements and policy proposals. Here is but one example: sometime over the last year, Paul Ryan proposed a new budget plan with economic analysis provided by the Heritage Foundation. The plan started to unravel after Paul Krugman noticed the plan projected unemployment at 2.3% at the end of the decade. After that, a group of people (of which I was one) shredded the plan -- as in demonstrated that it was put together by a third-grader with a crayon. It got so bad that Heritage eventually took it down only to erase the more egregious assumptions. That's just one example of how the fact free the Republican party has become.

Kinda why we're so screwed, eh!

It's Just Life. You Do What You Have To

2011-11-28T16:35:00.001-05:00

"A quarter of a tank, and an orange."

There's nothing I can add.

Update: I guess what I can add is that watching this had me in tears.

H/T to the LW.

Repost Ripost

2011-11-28T16:17:00.001-05:00

A slightly edited version of my post from Feb 20, Federal Government Tax Receipts, was reposted today at Angry Bear, to my great delight. It has generated a lot of controversy. Basically, my stating that FICA, aka "the payroll tax" is a tax is getting some hard blow back.

More heat than light, though, it seems to me. Still, it's nice to have a wider audience.

Corporate Net Cash Flow - Pt 2

2011-11-28T11:10:00.001-05:00

In comments, Art suggests looking at CNCF divided by the GDP Deflator to strip out inflation, and provides a link to the relevant FRED graph. I put trend channels on it, 'cuz - well, that's what I do.

The original post WW II (Golden Age) trend is indicated with a green channel. The more recent trend, with significantly lower slope, is in the purple channel. For the green channel, the orange midline (eyeballed) is included.

This begs the question: when did the trend actually change? When you have a time series that bumps and wiggles along, it's tough to say for sure. One could argue that the channel shift started with the the last touch to the top of the green channel in the mid 60's, since that is where I've drawn the beginning of the new channel. But, the new channel can often be extrapolated back into the previous channel. So, though that interpretation can be visually compelling, it isn't necessarily correct. One way to get a handle on trend changes is to look at the standard deviation envelope, as I did here for the Federal Funds Rate. I haven't done that here. I don't have the time right now, and probably lack the motivation to go at it that way.

Another approach is to see where the data stops exceeding the channel midline. I'm not going to suggest any kind of a rule, but I have noticed that stock market trends tend to fail at the midline rather than the top line of the trend channel. The last touch of the midline occurred just before the 1980 recession. The first local peak to fall short of the midline is the double peak in the mid 80's. Soon after, the data line pierces the bottom of the green channel for the first time.

I'm going to suggest that the trend change is located at the midline failurein the early 1980's. But if you would prefer a different milestone, I'm not going to argue strenuously against it. I would like to get your line of reasoning though. I think mine is rational, and consistent with other economic phenomena. What do you think?

Any way you slice it, though, policy over the last 30 (at least) years have not been as good for businesses as were the policies of the previous post-war period. My take-away is that Republican policies of low taxation, deregulation, lax enforcement, union busting, and job outsourcing have simply been bad for the country and bad for the economy - bad in every way. Even the corporations are doing less well in this neoliberal period than they did when Keynesian economics informed policy.

I infer from this that Republican policy is based on ideology, not on facts or data. But, of course, this is no surprise.

Government Expansion and That Damned Denominator

2011-11-27T16:55:00.001-05:00

Krugman has another frustration post, where he has to complain about "the claim that Obama has presided over a vast expansion of government — a claim backed not by describing any specific programs, but by pointing to the share of federal spending in GDP."

The perceptive reader already will know where this is heading.

Well, part of the answer is that the ratio is up because the denominator is down. According to CBO estimates, in fiscal 2010 the economy operated about 7 percent below potential. This means that even if what the government was doing hadn’t changed, the federal spending share of GDP would have risen by 1.4 percentage points.

Then, look inside the budget data (pdf), specifically at Table E-10. You’ll see a surge in spending on “income security”; that’s basically unemployment insurance, food stamps, and similar items. In other words, spending on safety-net programs is up because the economy is depressed, and more people are falling into the safety net.

Evidently, PK can also do math. He's calculated how much of the approximately 4% rise in Fed Spending/GDP is due to the main contributing factors. Here is his pie chart. (Mmmm -- pie!)

He concludes:

What’s in that “other” category? Some of it is stimulus spending. Some of it is the leading wave of the baby boomers, who are starting to collect Social Security and enter Medicare. Some of it is rising health care costs.

What isn’t there, no way, nohow, is a massive expansion of government, which is a figment of the right wing’s imagination.

Corprate Net Cash Flow

2011-11-27T12:39:00.001-05:00

Connecting peak to peak a la Krugman, since 2005, CNCF seems to have established a new trend line (red) at slightly lower slope than the trend line from the late 90's (blue.) This, in turn, has a lower slope than the previous trend line (green) from about 1985.

You'll have to believe me when I tell you a few historical facts (or go to FRED and look them up yourself.) First, the green line slope is virtually identical to that from 1950 through the early 1970's. Second, the slope from the late 70's through '85 was greater than the green line slope (you can see that in this chart if you look to the left.) Third, the slope through the mid 70's was greater still.

Restated, the growth of CNCF has never been slower in the post WW II period than it is right now. Yet Karl Smith is excited about current growth, is making optimistic predictions about 2012, and expects inflation.

My comment:

What they miss is that labor’s share of national income will fall and probably at a slightly faster pace than before the recession.

I am one who so objects, and I certainly haven’t missed it.

http://jazzbumpa.blogspot.com/2011/06/labors-share.html

How can increasing corporate profits, per se, be inflationary? This just enables even greater wealth disparity. A falling labor share means most people get squeezed out of buying discretionary items. Hence, a continuing (and increasing?) aggregate demand shortfall,

I’d love to see a detailed explanation of how inflation can increase in this scenario.

BTW – put your graph on a log scale and you’ll see your CNCF/GDP ratio climbing during recessions, and very dramatically during this last one. Such was not usually the case before about

1970 (recession ca. 1955 is the exception.)

http://research.stlouisfed.org/fredgraph.png?g=3yb

Also, beware the denominator. Progressively lower GDP growth since ca. 1980 skews your ratio upward.

http://research.stlouisfed.org/fredgraph.png?g=3yd

JzB

Karl and I can't both have it right. Which of us do you think is wrong, and why?

What I'm Thankful For

2011-11-24T09:26:00.001-05:00

First off for my family - my lovely wife, who is my greatest supporter, biggest fan, and the love of my life; for our offspring, who gave me an anchor and enriched my life in more ways than they can possibly know; for our 11 smart, talented and beautiful grandchildren, who have been bringing us joy for a decade and a half, and give me hope for our future; for my mom, always there for me in a time of need, and still going strong at 90, and my sister, who brings us both strength; for nephews, nieces, cousins, and in-laws, who I don't get to see as often as I would like.

I love and appreciate you all.

I'm thankful for free speech, and the opportunity to exercise it that this blog provides; and for anyone who stops by to read, especially if you leave a comment.

I am very fortunate to have grown up where and when I did, as part of the only generation for whom the American Dream was a realistic expectation. I'm thankful for the New Deal, that made America great, and the Great Society, which greatly reduced poverty, and moved us in the direction of equality and opportunity for all. I'm thankful for the opportunities I had: affordable education, a robust economy so I could find employment in young adulthood that was more than just a job; for American industry that gave me a career and a pension, for Social Security that allows me to have a comfortable retirement.

In my youth, my father often tried to impress on me how lucky I was to have all of these dreams, opportunities and expectations. I did not get it then, but I do now. We bumped heads - a lot - and I can't say it was all my fault. But he gave me perspectives I otherwise would not have known, a foundation in duty and responsibility, a passion for education, and a healthy skepticism.

Dad's been gone a long time. Our relationship was never easy, but he did a lot for me. Rest easy, dad. I'm thankful for you, too.

And, of course, for music, the great natural anti-depressant; along with all my musical friends and fellow noise-makers.

Oh - can't forget all my friends at the Crossword Corner.

Peace, love and joy to all on this Thanksgiving day.

What is the Contribution of the Finance Sector?

2011-11-23T21:12:00.001-05:00

From earlier today, Krugman points to an article by Andrew Haldane, coincidentally having the same title as this post. PK lifts this Notable Quote:

In fact, high pre-crisis returns to banking had a much more mundane explanation. They reflected simply increased risk-taking across the sector. This was not an outward shift in the portfolio possibility set of finance. Instead, it was a traverse up the high-wire of risk and return. This hire-wire act involved, on the asset side, rapid credit expansion, often through the development of poorly understood financial instruments. On the liability side, this ballooning balance sheet was financed using risky leverage, often at short maturities.

In what sense is increased risk-taking by banks a value-added service for the economy at large? In short, it is not.

PK's post was titled: "A Gigantic Scam." He concludes:

And he suggests that much if not all of the rise in the share of finance in GDP reflected this deception; in effect, Wall Street and the City were con artists extracting huge rents from an unwary public (and eventually dumping much of the cost, when things went bad, on taxpayers).

A lot more to say about this — but I’m needed in the kitchen to chop vegetables.

I saw Haldane's article reposted at Naked Capitalism yesterday morning, and left this comment. It generated some very favorable responses from other readers, some of whom told me that I did, indeed, miss things. Those blanks are well worth filling in. Check it out at the link.

So, to summarize:

1) Over the last 30 years banking has devolved from a necessary financial function involved in the allocation of resources and management of risk to essentially non-value-added rent-seeking activities implemented through high risk practices.

2) When the whole house of cards came tumbling down, the losses were socialized, while the criminals who perpetrated the underlying fraud walked off not only scot-free, but with huge bonuses.

Did I miss anything?

This is how we’ve been screwed for decades.
JzB

Have I ever mentioned that I love it when Krugman agrees with me? But it gets even better. I chopped veggies this afternoon, too!

Happy Thanksgiving, everyone.

Thanks, Mike

2011-11-23T11:03:00.001-05:00

It's a small thing, but I did get a nice call-out from Mike Kimel at Angry Bear, and I'm grateful.

Look Mom, No Future

2011-11-22T19:44:00.001-05:00

This absolutely adorable six-year-old girl is named Abigail. I'm listening to her dad talk to Randi Rhodes as I write this. He's a big occupy supporter. And so is she.

And so am I.

Newt

2011-11-22T16:21:00.001-05:00

Is "The Stupid Man's Idea Of What A Smart Person Sounds Like."

video platform video management video solutions video player

Here's evidence.

Mitt Romney is a God-Damned Liar

2011-11-22T15:32:00.001-05:00

Stumbled across this at Yahoo, but also got wind of it from the LW this morning.

The title of the Yahoo article, "Romney turns up the heat on Obama in New Hampshire," is horribly misleading. It should say, " Romney tells bare-faced lies about Obama in New Hampshire."

Democrats on Tuesday took issue with the part of the ad that quotes Obama saying, "If we keep talking about the economy, we're going to lose," pointing out that Romney took the quote out of context. Obama used the line in 2008, but he was talking about his opponent, Arizona Republican Sen. John McCain, not his own campaign. What Obama did say at the time, was this: "Senator McCain's campaign actually said, and I quote, 'If we keep talking about the economy, we're going to lose.'" In response, the Democratic National Committee slammed Romney, calling him "a serial deceiver."

Here is the HufPo link from the LW, correctly titled: "Obama Campaign Blasts Romney's First TV Ad As 'Deceitful'"

Serial deceiver strikes again. God-damned liar is more on the mark.

Brutal Police Assault Causes Miscarriage

2011-11-22T13:33:00.001-05:00

I just heard about this on Thom Hartmann's program.

Here's a write-up. According to one of Hartmann's callers, the liberal-biased MSM in Seattle is refusing to cover the story.

“I was standing in the middle of the crowd when the police started moving in,” she says. “I was screaming, ‘I am pregnant, I am pregnant. Let me through. I am trying to get out.’” At that point, Fox continues, a Seattle police officer lifted his foot and it hit her in the stomach, and another officer pushed his bicycle into the crowd, again hitting Fox in the stomach. “Right before I turned, both cops lifted their pepper spray and sprayed me. My eyes puffed up and my eyes swelled shut,” she says.

This is a perfect follow-up to the pepper-spraying of an 84-year-old woman.

When are we going to start filling the privately-owned prison system with these uniformed criminals?

Trends

2011-11-22T11:51:00.001-05:00

The trend is your friend; but when does it end?

Here's a look at the Federal Funds Rate since the mid-80's. The rate has gone through several cycles since an arbitrary start date of 1984, chosen to get a good close-up view of action over the period. The Fed changes the FFR whenever they feel like it, so the data points are not evenly spaced. The FFR is shown in blue, a 21 point exponential moving average* in yellow, and an envelope + and - one standard deviation - based on the same 21 points - from the average in red and green, respectively.

My Excel data file doesn't say where the data came from. Shame on me for carelessness. It may have been from FRED. If you're interested in the data and calculations, send me an email, and I'll send you the file.

The FFR goes on excursions, and spends a lot of time hugging one of the envelope boundaries. When it makes a move back inside the envelope by crossing a red or green line, it typically indicates a change in direction is about to occur. For this data set, crossng the red line appears to be more relaible than crossing the green line.

No indicator is perfect. Green line cross-overs give a couple of false signals, circled in purple. In each case, though, a real change did follow, eventually. In the first case, July, '85, the real shift was over a year later, in Dec. 1986, and about 1.5% lower. The Jan. '02 false signal was about 12 months early, and .3% high from the real cross-over, and .55% above the ultimate bottom.

Using signals together can be helpful. Here is the FFR again, this time shown with the Standard Deviation, multiplied by 5 to put it on a comparable scale.

Not every bottom in the StD corresponds with a bottom in the FFR. But, every bottom in StD that follows a green line cross-over does signal that the FFR is about to turn up. Note that the July, '85 crossover occurred when the StD was high and rising. There is a little blip in StD in the second half of '03, concurrent with the start of the ultimate bottom, a flat spot around 1% running from July, '03 through May, '04.

These two signals working together gave a very reliable indication of trend changes over a period of two and a half decades.

We are now in a region that is unprecedented. The FFR is hugging 0, and so is the StD. These things can only go up from here; but who can say if or when it will ever happen? Since the FFR topped in 1981, it's been a series of lower highs and lower lows. The lows have hit bottom. Highs - should we ever get any - could possibly continue to trend lower.

_________________________________________
* The problem with a simple moving average is that every early point in your data packet has the same weight as the most recent one. An exponential moving average weights the most recent data point. A series of points thus weighted skews the average towards the most recent action. Any moving average is backward looking - there's no help for that. But an exponential moving average increases the importance of recent data, and yields a more responsive, quicker moving average line.

Wealth Map

2011-11-22T10:09:00.001-05:00

Swiped this from Asymptosis. Despite the citation to the right of the pic, I'm unable to locate the source.

Income - Part 2

2011-11-21T15:50:00.001-05:00

In comments, Steve asked for a graph of the difference between median and mean income, "y axis appropriately scaled so we can see when the big median/mean divergences happened." Happy to oblige. In the original graph, the difference line was dwarfed by the mean and median values.

Zeroing in on the difference, we see that it grew from about $3500 (constant 2008 dollar basis) to a peak of $20,192 in 2006. It then backslid to $18,113 in 2008. Other dips occur in 1958-9, 1975-6, 1991-2, and 2002: each at or within a year of a major recession - quite a painful way to strike a feeble blow for equality. By this criterion, the entire 21st century thus far has been an economic doldrum. I hope you didn't need this data bit to be so informed.

I had Excel throw an exponential best fit line on the dataset. With some wiggles, it's not a bad match, overall, with R^2 = .9617. The exponent is .0326.

The biggest gain in the spread came, of course, in the Reagan - Bush I years, growing from $7837 to $15057, a gain of 92% over 12 years. During the Clinton term it increased to $18806, or 24.89% during those 8 years.

For what it's worth, here is a plot of year over year % change in the difference.

This is color coded by President's party, from year 2 of an incumbent party's term to year 1 of the new party's term, when there is a change. I figured that the first year of any President's term is based on the preceding executive's budget and policies, and it takes a while to implement new policies. Note also that there is a spike in the first year of each new democratic Prez, and a drop in year 2. This is what made me think to code it this way.

Also included are an average for the entire set, 2.7%, in purple, a 5 year moving average, in yellow, and term averages from year 2 to term end + 1 for each president. Kennedy-Johnson and Nixon Ford are taken as single administrations; Reagan and Bush I are separated. Dem administration averages typically hug the long average line, while Rethug administrations run mostly above it. The exceptions are Truman and Shrub, both falling far below the long average line.

The single big spike is the difference growth from 1992 to 1993, when mean income recovered a full year ahead of median income, as seen in the original graph.

This data set ends in 2008, so none of the results of Demopublican president B. Hoover Obama are indicated.

U.C. Davis

2011-11-20T21:52:00.001-05:00

If you see Davis, it's because the whole world is watching.

Yesterday, U.C. Davis History Professors Eric Rauchway and Ari Kelman posted from their normal Edge of the West gig about the unprovoked assault on passive student protesters, and reposted as a guest blog at Crooked Timber today.

I'm not going to editorialize about the brutal and criminal police actions. (Video is embedded at the links.) They speak more loudly and eloquently on their own than I could with any verbal embroidery.

In comments at CR, we find links to reactions from other U.C. Davis Professors.

Bob Ostertag:

Chancellor Robert Birgeneau thus joins the likes of Bull Connor, the notorious segregationist and architect of the violent repression of the civil rights movement in Birmingham, Alabama, as some of the very few people who view the non-violent tactics of Martin Luther King as violent.

Nathan Brown, in an Open Letter to Chancellor Linda P.B. Katehi:

I call for your resignation because you are unfit to do your job. You are unfit to ensure the safety of students at UC Davis. In fact: you are the primary threat to the safety of students at UC Davis. As such, I call upon you to resign immediately.

These chancellors are part of the servitor class - lizard people who are minions to the wealthy elite who are eating at the core of American democracy.

These professors are brave and principled men who dare speak truth to power.

They - and the student protesters - give me hope (however minuscule) that all will not be lost.

Income

2011-11-20T10:46:00.001-05:00

I generated this graph a while back, but evidently never posted it. It shows the spread between mean and median income. If the mean is greater then the median, income is skewed to the top half of the population. Greater spread means greater skew. It's that simple.

Somewhere along the line, I had a computer crash and lost the data file this graph came from. So - I don't know what dollar basis this chart uses.

Here, below, is a more extensive graph. Same story, but different numbers. Data is from the Census Bureau, Table 696. Click the top link at this Google search and it will download the data file. I got this from an earlier version, in constant 2008 dollars. Current download version is in constant 2009 dollars.

Top Line in the graph is mean income, second line is median income, bottom line is the difference. Each line is color coded by President's party: Rethugs in Red, Demos in Blue. For the difference line, Rethugs are in yellow, Demos in purple.

There was not a lot of disparity growth through the 50's. It stepped up every decade, until the most recent. Well, the rich are going to get richer. I think I read that somewhere. Except for the Shrub administration. That was close to dead flat for everyone, so the difference didn't even change.

Note, though, that the really big change comes from Reagan, and especially Bush 1. The big jump from 92-93 happened because mean incomes recovered a year before median incomes did. Disparity grew through the Clinton years, but at a slower pace. Then Shrub happened, and it was the doldrums, or worse, for everyone. A decade of zero wealth generation.

No wonder conservatives love him.

That Aggregate Demand Thang

2011-11-17T09:48:00.001-05:00

Karl has a thoughtful and insightful post, stating:

All that having been said the proximate cause of the slump is a sharp decline in consumer spending from which we have not recovered.

He has a couple of graphs to indicate the gap. Graph 1, Personal Consumption Expenditures, shows a recovery from the '09 low to a new recovery high, above the late '07 pre-recession peak. (See it at the link.) But this metric includes a few items that are either non-discretionary or totally outside of the consumer's control, like bank profits (!?!)

Graph 2 is more relevant. It indicates retail and food service spending. Again not 100% discretionary, but a lot closer. By thiis metric, we have not yet attained a new recovery high, and might actually be leveling again.

In conclusion, Karl asks:

We don’t think their desire for consumption has somehow become completely sated. This implies that there is some price at which they would want to buy more real goods and services. Yet, the market does not find that price.

Why?

My response:

Excellent post, Karl. Thank you.

The market does not find that price because too many people can't afford to pay it. Real unemployment is still around 16%, and new job creation is at a far lower wage scale than that of the old jobs that were destroyed. I think this is fairly obvious.

Also, every penny generated by GDP improvements and productivity gains over the last 3+ decades has gone to the top two quintiles, and within them, disproprtionally to those at the top. The skew is greater the higher you go.

Today's generation of young adults makes less real income than their parents generation did 30 years ago. The American dream literally is dead.

Back to graph 1 - Even if the new trend line were more or less parallel to the old trend line (by my eye it has a lower slope), it is running about half a trillion dollars lower. At parallel trend, that gap will never be filled. At lesser slope, the gap widens every day.

This cries out for fiscal policy, which is not forthcoming.

We're screwed.

Quote Of The Day - "Oops!" Edition

2011-11-13T11:31:00.001-05:00

Maybe it should be "Jack-Booted Thugs" Edition.

"He's very well respected and liked. People are angry," the lawyer said. "If this can happen to a pillar of the community, it can happen to anyone."

Osama Siblani, publisher of The Arab American News in Dearborn, said he called the Dearborn police chief and the FBI to let them know Hammoud was the wrong man.

"This is not the end of the world but it's no small thing," Siblani said. "The charges are unbelievable. He has raised three doctors, a very down-to-earth guy. For me to even imagine he would do something like this is beyond my imagination."

Then, again he IS a Muslim!

H/T to the L/W.

Deep Stupid #21

2011-11-13T11:16:00.001-05:00

I rarely do DEEP STUPID posts any more. The process of researching and composing line-by-line refutation and ridicule is so time and energy consuming that I just can't do very much of it.

Here is one that speaks for itself - and so loudly, that all I have to do is post it.

Oh, what the hell -- Bachman evidently doesn't realize that China has protective tariffs, manipulates its currency, pirates software and other proprietary technologies, keeps costs low by polluting their own air and water, selling sub-standard, poisonous products, and has a labor system somewhere in the general neighborhood of feudalism.

Also, here's some commentary from TPM, where I swiped the video.

Aside from the basic absurdity of crediting a country that’s still officially communist with avoiding the pitfalls of the welfare state, it’s worth noting that Bachmann’s broad condemnation of LBJ’s legislative record is in open conflict with her own political positions. She has repeatedly positioned herself as a staunch defender of Medicare, the centerpiece of the Great Society programs, and has slammed President Obama for using funds from the Medicare Advantage program to help finance the Affordable Care Act. Her critique of saving for “retirement security” also runs up against her stated support for Social Security.
“Social Security and Medicare provide a safety net to millions of Americans,” an issues page on her website reads. “This is a system that many Americans have paid into their whole life. America needs to keep its promise to senior citizens.”

Via HuffPo. H/T to the L/W.

We Are Poorer than We Should Be

2011-11-11T12:50:00.001-05:00

Reading this post at Tux's reminded me of something I wrote for a project that will probably never see the light of day in its originally intended form and format.

Here, then, is the opening of what was intended to be a chapter in a book.

Part 1.

A DIFFERENT LOOK AT THE GREAT STAGNATION

Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist.

– Kenneth E. Boulding

It's no secret that the general economic environment in the U.S. has changed dramatically since some poorly defined moment within a few years of 1980. The dramatic decrease in the volatility of aggregate economic activity is commonly known among economists as The Great Moderation. The traditional view (circa 2005) was that this is a good thing, resulting from the absence of energy price shocks, improved monetary policy, and better inventory management techniques. This interpretation looks pretty hollow in the wake of the 2007 recession, when the economy collapsed, monetary policy was reduced to relative impotence, and energy price shocks are again dominating the economic landscape.

My view is that the volatility reduction is the result of a gradual decline in economic health over that time period – what skeptics like me call The Great Stagnation. In fact that is the title of a recent e-book by George Mason University economist Tyler Cowan.

I'm a bit on the skeptical side of agnosticism regarding Cowan's main point – that we have run out of low hanging technological, financial, and resource-based fruit. The technology claim, if it has any merit at all, might be an artifact of a slow down in government spending at all levels – coincidentally, also since about 1980. I’ll let those with more specialized knowledge sort out the rest of Cowan’s claim. My position is that, while Cowan's argument might (or might not) have some intrinsic value, it largely misses the point.

More on the mark is Cowan's corollary – that we are poorer than we realize. He thinks measurement techniques currently in vogue overstate our wealth. While this may be true, there is plenty of data available to demonstrate in directly measurable ways that, in the aggregate, we are poorer than we should be. And what makes this even worse is that growing income and wealth disparities have led to an economically top-heavy society that is probably unstable. Ultimately, this will require either effective mechanisms to redistribute wealth downward, or effective mechanisms to repress an increasingly impoverished and unruly population. The latter could be accomplished by a stark and impenetrable stratification of society into haves and have-nots – the kind of forced repression that leads to either South American style banana republicanism or 12th century European style feudalism. On the other hand, forced redistribution led to America's post WW II golden age.

I have not been a long-time observer of the deterioration of the human condition, so I did not have a keen view of the long, slow slide that has been taking place since the post WWII golden age ended. My awakening came with the impeachment of Billy-Bob Clinton, our first Bubba President. This, for me was a real WTF?!? event. To say there was no there there is to wildly overstate the significance of Clinton's history of dalliances with various consenting adults.

With my eyes thus opened, I watched the ~~election~~ appointment of The Shrub with a combination of horror and disgust. His plan to ruin America by going to war while simultaneously cutting taxes was a success that even Grover Norquist would have had trouble hoping for.

And now we have some significant minority (oh god, please let it be no more than that) of the American people openly embracing a rouge's gallery of even worse Rethug presidential hopefuls. People who cheer for Herman Cain's claim to be a surrogate Koch brother, and increase their donations in the light of his sexual harassment revelations.

The intellectual nihilism of conservatives is perfectly demonstrated by Shrub, Cheney, McCain, Cain, Bachman, and most especially by the idiotic Rick Perry. You see, it takes anti-intellectualism, ignorance or outright dishonesty to embrace the Rethug policies of upward wealth redistribution, and all that they imply.

I am seriously fearful of the world we will hand to my grandchildren - now aged from 4 to 14. We are on a road to to deep repression or revolution, and eventually, perhaps, even another World War.

Make it here, buy it here

2011-11-06T21:44:00.000-05:00

Visit msnbc.com for breaking news, world news, and news about the economy

The Mill's website

H/T to the LW

If You Want To Live The American Dream . . .

2011-11-06T20:17:00.001-05:00

. . . Move To Denmark.

Source.

Sunday Music Blogging

2011-11-06T13:03:00.000-05:00

Granddaughter Rebekka is in a children's theater version of ALLADIN. We're going to see it this afternoon.

That reminded me of this song, from the Disney movie version, that we played with the incomparable Wayne Bergeron at our Spring concert. Here he is doing FRIEND LIKE ME with his own band.

No vid - just a still shot of the recording studio. Sit back close your eyes and enjoy. Andy Martin on trombone, Bill Liston on tenor. Seriously awesome!

UPDATE: Turns out this was a Disney Junior production, so the song was actually in it. Not exactly this version, though.

Knight's Castle

2011-11-06T12:51:00.000-05:00

A request by Ari at EotAW for books to recommend to his precocious 9-Yr-old son reminded me of a favorite book from that time in my life

My comment:

I was 9 or 10 when I found KNIGHT’S CASTLE by Edward Eager at the Locke Branch Library in Toledo. Absolutely loved the dreamy magic realism. It’s a fine example of moral fiction that is not preachy. The story involves siblings and cousins, and does an excellent job of presenting the girls as equal to the boys, while recognizing each as a unique individual. This book was originally published in 1956! Went on a quest to find it again when my son was about 10. Fast forward: my wife gave me a set of Eager’s books a few years ago, and I read them with my grandsons – to their great pleasure.

That’s when I learned that Eager was from Toledo, also.

As a kid, I was enthralled with the middle ages - and dinosaurs, too, but that's a different story.

Was there a book that you were especially fond of as a child?

What the Hell Friday - Herman Cain Edition

2011-11-04T21:33:00.000-04:00

I just heard Rachel and Eugene Robinson discussing the extraordinary weirdness of the Herman Cain campaign - if it is indeed a campaign. They were speaking of it as performance art. I have to admit that never occurred to me, and now it reminds me a bit of Pat Paulson.

The even weirder thing about this video is that the crowd cheers - wildly and with reckless abandon - when Cain says," I am the Koch brothers brother from, another mother." OK - it was at a function sponsored by the Koch brothers group Americans for Prosperity.

If this is parody, it's brilliant, maybe even genius. If it's real, then Cain is an inestimable buffoon.

The weirdest thing of all is that I seriously have no idea which of these propositions comes closer to the truth.

Source.

Quote of the Day: Tim Duy On The Fragile Economy

2011-11-03T20:43:00.000-04:00

At Fed Watch

Bottom Line: With all attention focused on the Greek drama, plus the well-received Q3 GDP report, it has been easy to overlook the underlying fragility in the US economy. This was especially the case when US equities looked to be on a nonstop trip to the moon. Perhaps the US economy can squeak through the next few quarters, and perhaps, in contrast to my expectations, Europe is able to bring an end to the crisis with limited collateral damage to the economy. But I can't shake the feeling that the US economy closer to running on fumes than is commonly believed, and will run out of gas in a very hostile global environment.

The President's Really Awesome Week

2011-11-03T20:17:00.003-04:00

OK - not THIS week, but still . . .

Permalink

The Ruling Clawss

2011-11-03T16:27:00.000-04:00

Thanks to Eric at Edge of the West, we learn that children's author and illustrator Syd Hoff "had a radical alter ego, a Mr. Redfield who drew cartoons for the Daily Worker."

Here is a gallery of Redfield's work, collected as The Ruling Clawss in 1935. The vast majority of these sharply pointed political cartoons resonate with startling clarity 66 years later.

Check it out.

Inequality Trends in One Picture

2011-11-03T10:55:00.001-04:00

Via Krugman, from the CBO Report.

I've seen other graphs that tell this story, but this is the most succinct.

Just about all of the redistribution has taken place from the bottom 80 to the top 1 (and we know that most of that has actually gone to the top 0.1).

It’s a tiny minority, not a broad class of well-educated Americans, who have been winning here.

That's how can tell that this is not capitalism: capitalist competition would prevent this top-heavy aggregation. What we have is crony (pseudo) capitalism, corporatism, and near-monopolies. Every one of these business practices is anti-competitive, and therefore anti-capitalist.