Money Makes Dhe Vorld Go Around

Update:  Do NOT read this post.  It's a massive screw up.





But not if it's buried under a rock, or in it's nearest equivalent, a secure bank vault.

Graph 1 shows some aggregate money measures, along with excess reserves, the aptly named EXCSRESNS.

Graph 1 - M Aggregates and Excess Reserves

EXCSRESNS is placed on the right hand scale, because otherwise you have Graph 2, with all the aggregates flat-lined at 0, to a reasonable first approximation.

Meanwhile money velocity is dying a slow and agonizing death.

Graph 3 - Velocity of MZM

The Federal Funds rate has been at or below 0.20% for four consecutive years.  Add on a few rounds of QE, and you get this amazing success: unemployment now down to about the level of previous peaks.

Graph 4 - Unemployment Rate (blue)and U 6 9red)

And this is accompanied by the worst out-of-recession Real GDP growth in the history of ever.

Graph 5 - RGDP, YoY % Change

Of course, runaway inflation remains a clear and present danger.

Graph 6 - CPI, YoY % Change

Then, again, maybe not.

OK, Market Monitarists, what is the FED supposed to do?

Oh - I know - NGDP targeting.

If the Fed determined that NGDP should rise at 5% per year, businesses and households should behave with the expectation that their incomes will rise 5% each year, and by behaving in such a way they thereby generate the 5% increase. Of course, not everyone's income will rise by 5% just as not everyone's prices rise 2%. But aggregated across the economy, these decisions should produce the desired outcome for the national economy.

What is this?  Hand waving?  Dog wagging?  The almighty invisible hand?  Wishing can make it so?

Expectations, right?

People in households with flat nominal and declining real incomes are supposed to act as is they expect a 5% raise this year, and that behavior will generate real growth. 

But Winter is coming and the wolves will be hungry.  How long is that supposed to last?

Besides - do you think that most ordinary struggling people have any knowledge of what the FED is, let alone some way to modify their expectations based on tongue wagging and ineffective policy actions they are, at best, only dimly aware of?

Seriously - what is the transfer mechanism?

Jobless Claims Remain at Four Year Low

Steve Benen at Maddowblog reports:

The number of Americans who filed requests for jobless benefits fell by 14,000 last week to 351,000, matching a four-year low, the U.S. Labor Department said Thursday. Claims from two weeks ago were revised up to 365,000 from 362,000. Economists surveyed by MarketWatch had projected claims would fall to a seasonally adjusted 355,000 in the week ended March 10. The average of new claims over the past four weeks, meanwhile, was unchanged at 355,750.

In terms of metrics, keep in mind, when these jobless claims fall below the 400,000 threshold, it's considered evidence of an improving jobs landscape. When the number drops below 370,000, it suggests jobs are actually being created rather quickly.

We've now dropped below 370,000 for six consecutive weeks, and seven of the last nine weeks.

  

The stimulus, of course, has been a huge failure.

Recovery Continues at a Ho-Hum Pace

The economy added 227,000 jobs in February.  The overall unemployment rate stayed at 8.3%.

As good news goes, this is pretty weak, but at least it isn't bad news.

This number would have been only average during the Clinton administration, when times were good.  The numbers ought to be much better than that during a recovery.  But we don't have recoveries any more.  This number is not a lot more than what it takes to keep up with population growth.

So, yeah, the economy is growing.  But it's not growing fast enough to do a lot of good, especially when every nickle of income growth goes to the top 50% of the population.

Here's the chart, for the private sector only, from Maddowblog.  OK news.  Nothing exciting.

The Real World of Real Work

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

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?

When Mitt Romney Came to Town

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

Misreading a Trend

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 ..."