Remarkably Stable NGDP Growth - Part 2

The low standard deviation of GDP growth is simply an artifact of low GDP growth numbers.

OK - that's a bit over stated.   The low standard deviation of GDP growth is primarily an artifact of low GDP growth numbers

Suppose you have a data set with values hovering around 13, with a range of +/- 20%.  The entire packet width is 5.2.  Now suppose you have another data set with values hovering around 3, with a range of +/- 20%.  The entire packet width is 1.2.  Does this suggest that the second data set is more steady than the first?

The graph shows the 13 quarter standard deviation of GDP growth since 1947.  Data is from this FRED page, Gross Domestic Product, 1 Decimal (GDP), Quarterly, Seasonally Adjusted Annual Rate, 1947-01-01 to 2013-01-01.  GDP growth graph can be seen here.  

I like 13 because it's a Fibonacci number, but it's also the duration in quarters of the current remarkably stable GDP growth, so let's see how it works over time.

Yes the standard deviation is dropping like a rock for the last 5 quarters.  It dropped like a rock from 1952 to 57 [with three separate stages that were each comparable to what we are seeing now,] from 1961 to 1965 in two stages, and from 1984 to 88 in two stages.  It always drops after a recession - sometimes like a rock and sometimes in a more leisurely fashion.  The reason that the bottom values were higher in those earlier periods than what we're seeing now is that the GDP numbers were bigger.

 13 Qtr Standard Deviation of GDP Growth

A red line connects most of the local minima.  A parallel green line is rather arbitrarily projected from the 1991 maximum.  An orange horizontal line is projected forward from the 1999 minimum of 0.46.  The standard deviation stayed in the range of 0.47 to 0.48 for the next three quarters.  Along with the last two quarters of 2006, at 0.47 and 0.45, respectively, these are the 6 quarters since 1947 with lower standard deviation values than the current 0.53.  The current value is, in fact, only at the mid range of the trend channel.

A purple horizontal line is projected forward from the 1988 low of 0.90.  The reading immediately prior to the current one, at 1.11, was above that level.  So we find the current reading is the 7th from the lowest on record.  Only now with the last reading, has the standard deviation fallen low enough to enter a range of values at or below 0.90 that includes 33 of the preceding 100 quarters.

I think the really remarkable thing about recent events is the steepness and height of the climb from mid '08 to mid '09, caused by the great recession.  The precipitous fall from Q1, 2012 is just one more reversion from an extreme.

Not everyone shares my fascination with trend lines, and you can certainly quibble with the width of the channel I've drawn.  But I think there are two indisputable facts.

1) The standard deviation of GDP growth has been trending down since the end of WW II.  The rate of decrease has been far lower in the great moderation than it was prior to 1965.

2) The current value of the standard deviation is not in any way remarkable over the last 25 years, or even the last 50 if you accept my trend line view.

It's certainly possible that the standard deviation will continue to drop for the next few quarters.  But it can't fall below the lower trend line, since it has already crossed the theoretical minimum of 0.00.

It's also possible that we'll slip into another recession and the standard deviation will balloon again.

The main thing to understand is that recessions cause the standard deviation peaks, and that the second most effective way to have a low standard deviation is to avoid recessions.

The first most effective way is to have remarkably low GDP growth.

In my view, this is not remarkable stability.  It is the American economy enduring a slow and agonizing death.

There's another more nuanced way of looking at the data that we'll get to it in part 3.

Remarkably Stable NGDP Growth - Part 1

In comments here, Mark Sadowski says a lot of thoughtful things, including this:

Beckworth is claiming that AD growth has been steady despite fiscal contraction which it has. In fact the standard deviation of the quarterly growth rate in nominal GDP (NGDP) since 2010Q1 is by far the lowest for any 13 quarter period on data going back to 1947. Many Fed watchers have been stunned by the amazing steadiness of the NGDP numbers despite all the various fiscal policy shifts (or cliffs) and this raises serious doubts as to the existence of a liquidity trap.

I'll admit, it's not at all clear to me how the serious doubts follow from the amazing steadiness when GDP growth is stuck in the mud, but it's that steadiness that I want to focus on - eventually.

Meanwhile, Graph 1 shows the YoY percentage growth in GDP over my life time, seasonally adjusted quarterly data.

Graph 1 - YoY GDP Growth since 1947

As you can see, GDP growth has certainly been steady over the last three years, albeit at a remarkably low level.  Market monetarists argue that since monetary policy has been inept and fiscal policy has not been expansionary, this steady growth casts serious doubts on the efficacy of fiscal policy.

Why can't one simply turn this around and say that since fiscal policy has been inept and monetary policy has not been expansionary, this steady growth casts serious doubts on the efficacy of monetary policy?  Either way it makes very little sense.  And you'll note that supporters of fiscal policy never make this kind of claim.

But let's get back to GDP growth.  Remember the simplicity of Graph 1, because in Graph 2, I'm going to make it very busy.

Graph 2 - YoY GDP Growth since 1947, Decorated

The purple line is a 13 quarter moving average and the yellow line is a 13 year moving average.  Both have been in decline since the early to middle 80's.  The red line is the growth level at the bottom of the 1982 trough - effectively a lower limit to GDP growth until the 2009 collapse.   The green line is the growth level of the 1993 recovery - effectively an upper limit to GDP growth that we may never again experience.  The blue line connects peaks since 1989.  The downward trajectory is both unmistakable and disturbing.  This is the legacy of Reaganomics, deregulation, globalization, a bloated rent-collecting finance sector, and growing inequality.

Average GDP growth for the entire data set since 1947 is 6.67%, nearly identical to the peak green line value of 6.58%.

Why is this relevant?  For a decade starting in 1971 GDP growth was never below 6.58 percent.  Since 1993, it's only been above it for a brief blip in 2000.  For much of the 70's GDP growth was above 10%.  For the last 20 years GDP growth has been below the 6.67% average since 1947, and for the last 6 years, it's been below 5%.

The low standard deviation of GDP growth is simply an artifact of low GDP growth numbers.

That will be the subject of part 2.

The Tigers in May

In the April wrap up, I mentioned that the Tigers were erratic.  That has not improved.  Runs scored and runs allowed are both up a bit, and the standard deviations are up for both, as well.



In yesterday's Freep, Drew Sharp wrote a don't-worry-be-happy article on the Tigers' impressive starting pitching.  It's been great the last few days, but also erratic over the season.  I can't really quibble much with what Sharp says. They're in first place, now at 33-26, with a far better record than at this time last year, when they spent a great deal of the season struggling to get above .500  It's what he leaves out that's troubling, and we'll get to that.  Also in yesterdays' Freep, John Lowe fills in some of the blanks.

Before yesterday's game time, the Tigers were 24-15 when they get a quality start [QS], leading the league with both numbers. [Verlander then turned in another one for a win last night.]  They're tied with KC at 15 QS losses, against the Royals mere 16 QS wins.  It's pretty clear starting pitching is not a problem for the Tigers - but a few other troubling things are.

Lowe:

The Tigers have lost eight games in which they have led in the seventh inning or later. In five of those, they have gotten a quality start. In those eight losses when leading in the seventh or later, the Tigers have scored one run in the seventh inning or later.

That's the crux of it, on the offensive side.  The Tigers are mediocre in close games, less than that in extra inning games, and have no ability to come from behind for a late win.  That's because, win or lose, tight game or blow out, the Tigers offense is anemic after the 6th inning.  I heard on the radio broadcast last night that they are in the bottom three teams in late scoring.

And this from Lowe is why it's such a big problem.

The Indians have 11 fewer quality starts than the Tigers, but only two fewer wins in quality starts (24 for the Tigers, 22 for the Indians). If the Tigers don’t win more often when they get quality starts, and if Cleveland can get quality starts more often, perhaps the Indians will give the Tigers a race.

 Scoring per inning across the game has leveled a bit compared to April, but still falls off badly after the 6th.

Graph 1 - Tigers runs per inning in May

Contrast April, when innings 4 and 5 were powerhouses.  In each case, 10 is a proxy for all extra innings.

Here's a look at scoring by game.

Graph 2 - Tigers runs per game in May

And here's April.  Same song, different verse.  Blue line is runs per game, green line is an average to date from the first game, yellow line is average over the last 5 games.

Here are opponents runs per inning.

 

 Tigers Runs Allowed per Inning in May

 Despite the strength of starting pitching, runs allowed in the first 2 innings has deteriorated badly, compared to April. Granted, there were three more games, but the differences are far from proportional.   The 7th inning has also gotten much worse, though most of that comes from one bad inning by Sanchez against the Pirates on 5/29.

Here are some random stats.



Relief pitching has actually improved a bit, but the closer problem still looms large.

That along with the inability to score late could be the Achilles heels of an otherwise powerful team.

What the Hell?!? Friday - Afterlife

In my fantasy of the perfect afterlife, when the Westboro Baptist Church people stand before god to receive their judgment, they're horrified to discover that the one man actually made in god's true image is Nathan Lane.

More on the Lying Liars at the Heritage Foundation

I've called them out a few times, here, here and here (with some help) and here.

Now, Steve Benen reports, one of their economists been caught lying to the Senate Budget Committee.  

As the occasionally reliable Matt Yglesias recently pointed out regarding a different passel of Heritage lies:

But it illustrates an underappreciated point in Washington, namely that even ideological think tanks do their movements a disservice when they do bad work. As Republican members of Congress ponder what to do about immigration, having accurate information about its fiscal impact would be very useful to them. You actually want to have a team of people "on your side" who you can trust to do good work. Heritage is not that team.

True, but MY misses a rather vital feature.  If you are trying to make points that do not comport with truth or reality, you have to lie, pretty much by default.  And you can't do good work if you are lying.

Benin replies:

That's true. If there are any Republican policymakers left who care about quality scholarship and reliable data, they'd no doubt like to rely on an institution like the Heritage Foundation as a go-to source for credible research. But as Heritage transitions from its traditional role as think tank to its new role as an activist group, and the intellectual infrastructure on the right deteriorates, GOP lawmakers no long have such a resource.

But that's not quite right, either.  Heritage has been lying to promote an agenda for as long as I've been aware of them.  If Rethug lawmakers ever had such a resource, it's been gone for a long, long time.

H/T to PK

JzB Smackdown with Some Thoughts on Trends and Context

[Substantially revised and updated, 6/5-6/13]

João Marcus Marinho Nunes is personally offended by my previous Angry Bear post.  

Personally I was ‘offended’ by being ‘accused’ of “using short-time series data”, ignoring “what is a valid context” and “cherry picking”.

 Which was odd, since I didn't accuse him of anything.  In fact, he wasn't even on my radar screen.  He then goes on to show a bunch of nice and interesting graphs that have nothing at all to do with my point, and concludes:

PS Maybe JazzBumpa thinks he´s a modern day Robespierre fighting against (in this case imaginary) absolutism!

Actually, I'm pretty close to agnostic on the subject of Market Monetarism, - as he identifies the subject of my (imaginary) absolutism in his comment at my post.   I thought I had made it pretty clear that what I was criticizing was the kind of confirmation bias that induces one to construct questionable data analyses that support pre-concieved conclusions.  The fact that the people doing this were market monetarists might be illustrative, but is not really central to my criticism.

I welcome disagreement, but it's more helpful and constructive if the points of disagreement have some relevance to the point I was trying to make.  I elaborated a bit in a comment at Nunez's blog, which you can read there, if you're interested.  What interested me was some piling on by Mark Sadowski, in comments both in my post and at Nunes'.  While I think Sadowski missed [or perhaps ignored] my point, he makes a couple of his own - one of which is actually Krugman's, whom he quotes.

“…To see what’s going on, you need to do two things. First, you should include state and local; second, you shouldn’t divide by GDP, because a depressed GDP can cause the spending/GDP ratio to rise even if spending falls. So it’s useful to look at the ratio of overall government expenditure to potential GDP — what the economy would be producing if it were at full employment; CBO provides standard estimates of this number. And here’s what we see:

Spending is down to what it was before the recession, and also significantly lower than it was under Reagan.

Krugman's Graph

Howler [Quote] of the day, with Derp

This is simply magnificent.

The saving grace for the conservatives on this front is that they, by virtue of being conservative, at least have an understanding into how human nature actually operates.

--  Eric Ericson

Really - could it ever get any better?  Well maybe.  There is so much more here.  Go read the whole thing, if you have the stomach for it.

Or, if you are of a more delicate constitution, you could simply read the last two paragraphs of Josh Barro's response to E.E.'s would be smack-down of Barro.

This is a strategic problem for Republicans for several reasons. One is that the party’s reliance on a resentment-based appeal has caused its policy apparatus to atrophy. Erickson is not alone among conservatives in thinking that “academic and technocratic” approaches are best left to pointy-headed liberals. Another is that people like Erickson are a declining share of the electorate.
 
Basically, Erickson is derpy. And Erickson has big appeal to conservatives because lots of them are derpy. But the country is getting less derpy, and in time the Republican party will have to get less derpy, too. That’s my project, and I don’t expect Erickson to like it.

 

[Read more: http://www.businessinsider.com/erick-erickson-shows-the-worst-in-gop-2013-6#ixzz2VFn8NnIl]

This is the Republican party tearing itself apart, and it can't come to fruition soon enough.  Vacuous know-nothings like Ericson on the one hand [who evidently does not realize that Obamacare is a conservative plan put forth 20 years ago by the Heritage Foundation - hence its many flaws] and younger, less radicalized thinkers like Barro.  I haven't paid much attention to Barro, so I don't know what kind of a thinker he is. 

But what kind of thinker would remain aligned to the Republican party of 2013, when there is a much more rational conservative party available.  Is the fact that they call themselves "Democrats" really that off-putting?

H/T to Delong.

More on Ineffective Fiscal Policy

This is a companion piece to Steve's AB post from earlier today, where he points out the specious reasoning of  "the likes of Scott Sumner, David Beckworth, Lars Christensen, et al., claiming that fiscal austerity has obviously had no effect on GDP growth."

I wrote Sumner off a few years ago due to a highly unfavorable chaff/wheat ratio.  I've tried really hard to like Beckworth, but these guys simply wallow in confirmation bias.  I've repeatedly criticized Beckworth for cherry picking short-term time series data to make his points.

Comparing 2013 to '12 is an example of time series cherry picking used to justify absolutist dogma.

Back on Feb 10, Beckworth said: "despite this austerity happening at a time of high unemployment and a large output gap, a slowdown in aggregate demand growth has failed to materialize."

And also:  "we should at least see aggregate demand faltering over the past few years while this unfolded. But in fact, we see relatively stable aggregate demand growth, as measured by NGDP"

He does admit in the end that, "the Fed has failed to restore NGDP to its pre-crisis trend." but uses this to get in a dig at the Fed for not following his preferred agenda.

Despite the admission, this is absolutist thinking.  Austerity and demand growth in this view each have an on-off switch.  There is a refusal or unwillingness to recognize matters of degree.  GDP growth is slower than before the crisis, and the slowest of any alleged recovery period ever.  Blaming the Fed willfully ignores the part played by fiscal austerity

My comment, which he also ignored, is as follows. [Graphs added, in place of links.]

__________________________________

Yes, your graphs all show relative austerity. Except for total government expenditure/GDP - yes falling rapidly, but still higher than any pre-2007 number. And relative is relative. I still think you are considering austerity in absolutist terms.  [Afterthought - total government expenditure as a direct measure is basically flat, not falling over the past three years.  Another example of using a denominator to skew the view.]

We now have the slowest growth in real personal consumption expenditures, % change YoY, of any non-recessionary period in the WW II era. In fact, by that measure, this is the most anemic recovery on record.  [Graph 1]

Graph 1 - Real Personal Consumption Expenditures, YoY % Change

If you prefer GDP growth, this "remarkably stable" measure [% change YoY] has plateaued at or below the level of troughs in the last 8 recessions, going back to 1960. [Graph 2]  So, by that measure, this is the most anemic recovery on record.

Graph 2 - GDP, YoY % Change

Unemployment has fallen, but remains at a level above that of most recessions.[Graph 3]

Graph 3 - Civilian Unemployment Rate

The worst recovery in my life time is pretty dismal success. Plus, wealth and income disparity continue to increase. With sequester looming, I think we're in for a very rough ride.

_______________________________________

There are legions of economists who simply refuse to recognize that fiscal policy can make a difference, and are willing to torture data in an attempt to validate this point of view.

If you want to make a point using time series data, you really need to consider what is a valid context.  Is it this year vs last year, or vs long range historical trends? 

If you need to cherry pick or engage that ol' devil denominator to make your point, then your point has questionable validity.

In Which I disagree with Clive Crook

In this Bloomberg column, Clive Crook criticizes Paul Krugman for 1) smugly being right all the time, and 2) showing insufficient respect for those who are wrong all the time.  Please read it and form your own opinion.

I suppose it's not particularly relevant that PK has been called an idiot, a moron, a communist, a lying political hack, a racist lying hack, and my hands-down favorite, a war monger.  So let's just move along.

To support his point, Crook cites this blog post by PK, and extracts from it this idea:

Krugman was responding to critics who accuse him of seeing everybody who disagrees with him as either a fool or a knave. He says that’s not right: Many of those who disagree with him are sociopaths. 

 “The point is not that I have an uncanny ability to be right; it’s that the other guys have an intense desire to be wrong,” he says. “And they’ve achieved their goal.”

Do you see the problem here?  Crook overstates his case rather dramatically.  PK hasn't called anyone a sociopath, so far as I know, and certainly not in this post.  [Though I have no doubt that a certain congressman, whom PK has criticized loudly and often, qualifies - in spades.]  What he is saying is that they have an agenda, and being wrong means exactly nothing to them, as long as their agenda is promoted.


Crook goes on to say this:

Krugman says his opponents are motivated by politics. “Am I (and others on my side of the issue) that much smarter than everyone else? No. The key to understanding this is that the anti-Keynesian position is, in essence, political. It’s driven by hostility to active government policy and, in many cases, hostility to any intellectual approach that might make room for government policy.” 

 Talk about lack of self-awareness. Does Krugman imagine that he isn’t motivated by politics? 

Crook actually has a point, but not the one he intends.  First off, PK has a valid theoretical and practical basis for his beliefs, while the other side really has been consistently wrong, intellectually nihilistic, and responds by doubling down with more wrong.  More importantly though, if PK had been less polite, and said "rabidly purblind partisan politics motivated by a starkly anti-democratic agenda" he would have been less polite, but far more accurate.  So Crook's quibble with the word "politics" is either a bit vacuuous or the resultant of trying to hard to find something to dispute - an all-too-common feature of PK's would-be critics.

If you've read Krugman's writings from the 90's you know that at that time he was a basically apolitical middle-of-the-road, actually rather conservative writer, making economics accessible to know-nothings like me.  He later became politicized by the persistently willful wrongitude of the Bush administration, which set the stage for the even more wrong and more extreme current Republican party. He doesn't criticize them because of his ideology, he criticizes them for theirs, which is consistently and demonstrably wrong.   And he does this while generally maintaining a high level of politeness.

So, yes, PK is motivated by politics, but it's a politics that strives to reach the truth and promote the common good, rather than some ideological predetermined end point that favors an already privileged overclass. 

Here is Crook's thesis:

Meanwhile, for the side that thinks it has the better arguments, naked contempt for dissenters is plain bad tactics. That isn’t how you change people’s minds.

But there's a problem here, too.  And it's one I understand, since the same criticism has been leveled at me.  There's a truth contained there, it's pure Dale Carnegie, and it would be spot on - if we were contending with rational well-intentioned people.  But there's a deeper truth that Crook reluctantly acknowledges in his final paragraph.

It’s true that the modern Republican Party includes a growing number of extremists who have no interest in the kind of discussion I’m recommending. In their case, attempts at outreach would be so much wasted breath.

That's the reality.  The suggestion that PK needs to get out more is fatuous in the extreme. When you are dealing with liars, the best and most appropriate response is to refute the lies and reveal these fools, knaves and sociopaths for what they are.

Big Illegal Alien Tax Derp

A friend sent me the link to this vid.  It's so full of po' white angst and big scary numbers.




My comment:

Without condoning any kind of tax fraud or other crime, I have to say I'm a lot less troubled about this money going to [what I assume to be] poor people in whatever country than I am about the even greater number of billions of dollars handed LEGALLY as tax rebates to filthy-rich, resource-polluting trans-national mega-corporations in the petroleum industry, and the huge number of other highly profitable corporations that pay little tax, or none at all - in part because of off-shore tax havens.

In all seriousness, 4.2 billion is a big scary number, but if you look at the problems that ought to be addressed by the U.S. in priority order, this probably wouldn't make the top 100.

And I have to suspect that the pasty-faced, oh-so-patriotic southern Indiana news hawks who put this together are more than a little bit influenced by the brownish skin of those who benefit from this situation.  Sorry, that's just ugly reality.   Meanwhile, too-big-to-fail lily-white bankers on Wall Street are robbing us blind every day.

When's the last time you saw a 6 minute news report video on that subject?
.

April in the D

The Red Wings finished off a lack-luster season with a few strong games and slouched into the playoffs, garnering the no. 7 seed on the strength of defense, Jimmy Howard's goal-tending, and a few weak opponents.  They lost the first playoff game to the Ducks last night, after going into the 3rd period tied 1-1.  But that was after midnight, my time, and no longer in April, so I'm not going to talk about it.

Meanwhile, the Pistons ended a lack-luster season with a few lack-luster games and have the rest of the Summer off.

Which brings us to the  boys of Summer.

The Tigers have been - and I'll be polite here - a bit erratic.  They fell apart completely on a mid-month road trip, going from 9-5 to 9-9 and then 10-10.  Since coming home, they've had 1 rain out followed by 5 mostly impressive wins, and finished the month at 15-10.

Strengths - starting pitching, scoring early and often.  Starters have routinely gone through 6 innings, and occasionally beyond.  Scoring has been prolific, especially in innings 4 and 5, when the batters are seeing the opposing starter for the 2nd or 3rd time.

Weaknesses - relief pitching, inability to score late.  Valverde has been more than adequate in his three 9th inning appearances, with 2 saves, 1 hold and no runs allowed.  But bringing him back at all smacks of desperation - and rightly so.  The biggest scoring innings for the opponents have been 3rd, 7th, and 8th.  Tigers inability to score late is troublesome.

These differences are stark.  In the first 25 games the Tigers have scored only 20 of their 126 runs (15.9%) in innings 7 and beyond - on average, less than 1 run per game in these frames.  The opponents have scored 40 of their 98 runs (40.8%) in innings 7 and beyond.  

Here it is graphically, where 10 is a proxy for all extra inning.

Graph 1 - Tigers runs scored per inning, accumulated over 25 games

Graph 2 - Tigers runs scored per game in April

Blue line is runs per game, green line is an average to date from the first game, yellow line is average over the last 5 games.  Offense was sadly deficient in games 14-18 against the Mariners and Angels.

Tigers runs allowed per inning, accumulated over 25 games

Here are the win-lose results.




Baseball is a streaky game.  A win streak is a wonderful thing.  A losing streak is abject misery.

Data from the Tigers sortable schedule at this mlb web page.

Quotes of the Day - Pseudo-centrist Hackery and BHO Leadership Nonsense

Wingnut: "2 + 2 is 5!"

Krgthulu: "No, 2 + 2 is 4!"

Brooks: "This is a competition between partial truths, and the True Path to Wisdom, as always and everywhere, is to find the proper balance between them. Therefore, I discern the Deep Truth that 2 + 2 is 4.5."

Krgthulu: "No, you're both wrong, 2 + 2 is neither 5 nor 4.5, it's just 4 and that's all there is to it."

Brooks: "See? See? He's just a partisan!"

------ Slimhazard, commenting on Johnathan Chaits's article

Chait speaks to the role of opinion journalism.  He goes on to point out some guidelines for opinion journalists that are worthwhile for anyone who wants to engage in rational discourse, itemized below.  See the link for elaboration.

1)  Be intellectually consistent.
2)  Don't debate straw men.
3)  Guard against more than one kind of bias.
4)  If you’re going to write something that’s completely self-aggrandizing, you should probably own up to it.

H/T to Scott Lemieux at LGM, who also quotes Charlie Pierce giving MoDo the FJM treatment.

My favorite snippet from that brilliant snark-fest:

From the available evidence (again), and for all the relevance her insights have on what's actually going on in American politics, Dowd once again seems to be writing from an assisted-living facility on the far side of a world Beyond The Planet Of The Ultra-Vixens.