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« Sandbox - 20jun14 | Main | ‘The Battle of Bunkerville’ »

21 June 2014

Comments

stevenfrisch

"The bamboozle comes in when people begin hyping R2 or R3. This is done with loud celebrations that start when either of these ‘recoveries’ again climb to the level at which the recession began (blue dotted line). For R2 we will break out the champagne at about t = 72 while telling everyone that not only have we recovered to the 225 level where the recession began, but we are now again growing at the pre-recession rate of 4%. Happy dancing all around."

"Each of these 'recoveries', no matter the amount of confetti, defines the start of a new epoch in which we permanently fall short in both time and amount from what the nominal process would have provided. "

Of course all of this is premised on the idea that there actually was a 4% increase in GDP to begin with, establishing the nominal number, rather than the premise that the previous 4% increase in GDP was being driven by increased debt or new financial instruments making the economy appear to expand at 4% per year.

If we know anything about economics it is that there never has been nor never will be what "the nominal process would have provided." There is no nominal process that guarantees a specific outcome.

The conclusion also assumes that QoL can be accurately measured in solely economic terms. QoL can increase in other ways.

This is why looking at GDP alone is a poor economic indicator. It only provides part of the story.

I would rather have the politician who tells me the truth about the fact that R1 was a fiction to begin with than the one who pretends that R1 is consistently achievable.

fish

I would rather have the politician who tells me the truth about the fact that R1 was a fiction to begin with than the one who pretends that R1 is consistently achievable.

While I don't disagree with your statement, why on earth would you expect anything truthful from a politician?

stevenfrisch

I don't, I was merely referring to the final line in George's commentary.

"However, to politicians playing to this widespread ignorance is part of their bag of tricks for a successful career at the taxpayers’ trough."

Joe Koyote

The stock market is at record highs. 53% of Americans own no stock nor do they have retirement plans that invest in stock. The top 1% own 35% of stocks, the bottom 90% own less than 20% of the stock, with the rest going to the 90-99% income group. Companies that traditionally serve the middle class (Sears, JC Penny, Red Lobster, the list goes on) are losing business and close to failure. The lowest earning 40% of Americans own just .3% of the total wealth. So basically the "recovery" isn't really a recovery at all, but a further transfer of wealth to the (mostly) top one tenth of one percent as the rest of the nation slowly sinks into the economic quicksand.

George Rebane

re stevenfrisch 818am - Lest others also be confused, the numbers used in the above tutorial are included for keeping the piece as non-technical as possible (I could have expressed all rates, amounts, and their relations algebraically, but that may have confused some mathematically challenged readers.) The similarity of the placeholder numbers to the current 'recovery' is only casual and may be disregarded with no loss of understanding the main point of how to evaluate touted recoveries, regardless of their attendant numbers.

Scott Obermuller

Let's all applaud Joe the K. He finally gets it! The Koch bros aren't stealing your money, it's the govt. The govt is artificially keeping interest rates low and driving money into the stock market. A lot of money is being made and the govt skims off the top with capital gains. The middle class is screwed out of interest on savings (confirmed by Janet Yellen herself) and the politicians get to point to rosy numbers and pat themselves on the back. It's not the free market capitalists because there is nothing like a free market here. The smart folk making money in the stock market know it's a bubble and are turning their illusionary wealth into something tangible or have plans to do so if the crash starts. And the bottom wage earners pay ever increasing prices for everything due to the money printing and ever increasing govt regs - remember Obama's promise - "under my plan, electrical rates will necessarily skyrocket". One of the few promises he kept. So it isn't the Tea Party or greedy capitalists, it's the govt. And you and I, Joe, get to pay taxes to keep this crap going.
Come to the light, Joe. The Koch bros are your friends.

Keen Observer

Scott is spot on, as is Joe. The idea of a true free market has not existed since the 1920's, when intelligent bankers created the commodity marketplace. At the detriment of the supplier (i.e. farmer) and the end consumer, the commodity marketplace allows a select few investors to artificially control and/or inflate the price of goods to their benefit, by buying goods from the farmer at a low price, and then swapping them amongst investors until the consumer pays an inflated price at the end of the chain. This occurs instead of letting supply and demand dictate the prices. Since commodities are a necessity to almost every consumer in the marketplace, Wall St. has essentially created an autonomous revenue stream, slowly siphoning additional funds from the hands of consumers, whom them have less funds to spend at businesses, thus overall hurting the economy. The most solid example of this can be seen in how Goldman Sachs single-handedly inflated the price of crude oil in 2008. If you haven't looked into that story yet, you are missing out.

Although Government is aware of such schemes, politicians are happy to go along to keep the PAC coffers full, and the federal government is more than happy to scrape some taxes off the top to plug some holes in our pathetic leaky budget ship. In the meantime, Wall St. bankers use their funds to pit citizens against each other through PAC's and worthless political parties, while simultaneously raping every American of their earnings. Corporations aren't the problem, the problem is the underhanded and very real collusion between the awesome power of the financial sector elite and our dismal federal government.

Walt

Even Joe can play in the stock market if he so chooses. NOTHING is stopping him. News flash Joe,, that's where retirement incomes come from. Not Grandma's mattress, or overstuffed foot stool.
That's how you can make money, with someone else doing the heavy lifting. Stop spending every last dime on personal gratification,( that 12 pack of Keystone isn't worth it..) and invest that change. 50 taxpayers in the future will thank you. With any luck, you won't be digging in THEIR pockets looking for your rent.

Then again, Government may set up that account FOR you. ( now there is a scary thought.) They will deem and take from what you "may" make to fund that account, then deem what they think you "need", and distribute it accordingly. ( minus all the "account management" fees they would charge.)

Keen Observer

Walt, I agree, there was a time when a man could go to work, earn a decent wage, and then sock away some money into a retirement account to live off later in life. But the sad truth is, that time has passed. Wall St. has become a casino, as the greedy bankers cause huge bubbles that make them tons of money in a short amount of time, at the expense of the little guy. Ask around and you will come across those whom had planned to retire in '08 or '09, that dream disappeared for many hard-working Americans. Wall St. needs heavy regulation, more so by far than any other industry. Its hard to argue against that, especially when you take into account that a very small handful of players essentially destroyed the financial markets of the entire globe.

Lord forbid government ever takes over our IRA accounts, we would be well on the path to an Orwellian style society that is even beyond the caliber that Orwell had imagined.

The key to a true recovery is a support of small businesses, through decreased regulation and a heavy investment into long-term infrastructure, which would allow for the US to compete with other technological powerhouses. I can't seem to wrap my head around our government's large welfare investment. Wouldn't it be more beneficial to instead invest in infrastructure (like Eisenhower), which would by default create jobs and have a long-term benefit on those willing to work for a living? But alas, how then will left-leaning politicians continue to secure voters, if they can't promise wealth distribution?

George Rebane

Keen Observer 1110am - It sounds like you have a more efficient distribution pipeline from commodity producer to consumer in mind. Can you give a few specifics on such a pipeline, especially emphasizing how prices at each point communicate the levels of supply and demand. Thanks.

Walt

I' don't subscribe to that " once upon a time" as stated. Be it even one buck a week out of a lean paycheck. ( because that's what we did.)
It all adds up. Now the dividends of the stocks that were bought on "chump change" and piece meal, are now buying more stocks. Every other fiscal quarter I go shopping on Scott trade.

The "big losses" I have had in the past came directly from government meddling. It knew " SO much better". Not to mention taking from one, just to give to it's cronies,, and "deemed it" legal. ( I was one of those bond holders that got hosed.)
GM was great as a long term holding, until "O" and Co. got their grimy meat hooks into it.

How long will 401K's still be good? Who knows. As far as LIBS are concerned, that's money just sitting there crying to be spent. And they are just the party to make that happen. ( by throwing a party)
Your investments are future bonuses for government employees with a title.

Keen Observer

George, the pipeline itself doesn't need to be changed, but previous regulations need to be re-enacted. During Hoover's presidency, commodity trading regulations were essentially removed, allowing for commodity traders to collude together. These traders would buy commodities at a low price (hurting the original supplier) and then would trade amongst themselves, and each cycle produced profit for the trader. By the time the end consumer or producer utilized the commodity, the price was artificially raised. I propose (like what was done up until the late '20s), that we limit the number of times that a commodity can be traded, which would allow the producer to make a larger profit, while the consumer then pays a lower price. In this case, both the provider and end user benefit, and the true cost of a commodity is tied directly to true supply and demand, rather than the whims of commodity traders. For further proof of this, I would recommend some research on Goldman Sachs current procedures on buying aluminum, and how they have disturbed the marketplace through legal but unethical practices.

Scott Obermuller

"greedy bankers cause huge bubbles" - No, no, no. The govt creates the conditions and some folks with money just look at the rules and go for it. Greed comes in all flavors. In a true free market state, the greedy would just end up going bust. But the prudent investor would be fine. It's the govt that sets the rules and they are stacked in favor of making the politicians look good for the short run. And they get elected by greedy fools in the electorate that want that sweet, short term hit.
If you lefties don't like wealthy people, then you must be mad at folks that eat a balanced diet and stay in good physical shape. What about the folks that end up fat and die early? Must be the fault of those 'greedy' folks that eat properly and stay in shape.

Walt

That old saying is true. " If your not rich, it's your own fault."
Wealth is gained in only a few ways. Work your ass off, to get it,, inherit it, steel it,, or win the damned lottery. ( filling out grant applications doesn't fall into the "work for it" lists)
Other than a filthy rich family member, no one is going to fork out big bucks to you just because your in the "have not" category.( because you wouldn't get off your ass and put forth the effort.)

LIBS like to say the U.S. is in "recovery". They like to point at the unemployment numbers. Funny how common core style mathematics can make those results look SOOO rosy. Maybe the LIBS can explain why more people today are out of work compared to the day before Dear Leader took office? But the U.E. number is lower for the same time period...
Instead of using the "U6 or7" tables, what is it? U2 or 3? Anything to say what "they" want them to,, not what's based in reality.
Just like "not counting" the newest flood of landscapers and lawnmower pushers that ICE is dumping all over the nation.
All those "have nots" need a roof over their head. I say go to the elections office and get the Dem. voter roster.( even sue the Nevada Co. Democrat Socialist party for their members list) and put two undocumented "have nots" under their care. ( Housing, food, medical etc.) It's time for those to practice what they preach.

George Rebane

Keen Observer 202pm - It seems that arbitrarily limiting the number of times a commodity can be traded would do away with the futures market, and that definitely would benefit no party in the distribution chain. Am I overlooking something?

ScottO 205pm - you are, of course, right in your description of how the rules are made and then how the game is played. This barn has been circled many times on RR, and no doubt the current go around will not be the last. Remarkable is that no liberal comes even close to understanding this point, and, as sure as the sun will rise tomorrow, they will return breathlessly with the revelation that all problems in the marketplace are caused by those 'greedy capitalists' while government stands innocently by. As oft repeated here, 'The good thing about capitalism is that it games the rules; the bad thing about capitalism is that it games the rules.' This maxim is fairly difficult to comprehend, and the test of its comprehension is that it causes one to look to the Rules Maker.

Bill Tozer

"This barn has been circled many times on RR". Quite true, Dr. Rebane. Rather than get in on the fun of slamming evil bankers, Wall Street, monopolies and gaming the system, I think Walt's sentiments are closer to the bull's eye..the man in the mirror is always the problem and also has the solutions.

The bottom line is we are closer to the next recession (by historical data) than any semblance of a "full recovery". Terms like the "new normal" apply to explaining our barely above flat line growth to the shrinking workforce to artificially held down interest rates. Even Obamacare paying for itself was based on a robust 6% GDP growth.

97% the economic forecasters have had to reign in their expectations of just two quarters out year after year. By the end of the year it will be 3.5% growth, no, make that 3.1% growth, no make that 2.6% growth, opps, make it 2.1% growth while the actual figure that comes in at year's end is 1.9% I have heard this over and over again since the Spring Recovery Tour the White House planned with Joe Biden leading the way on his decorated White Horse suddenly disappeared from the calenders of 2009, 2010, 2011, 2012. The new normal is creaming one's jeans over some green sprouts that whither in the full sunlight.

The lib's solution is to tax our way out of the red ink as they add more spending each and everyday. In California, we the taxpayers are now bailing out the Teachers Union with Brown's new budget to the tune of a few billion. We are on the hook. So, its the perfect time with our State budget awash with cash to increase the Teacher's salaries and raise more taxes to cover it all. Rosy forecasts and lets the good times roll.

Bottom line about government's management of the economy: We are headed towards bankruptcy. That is the new normal.

Bill Tozer

Keen Observer made a valid point. If we could just eliminate the middleman. Easier said than done. Just how do we kick Our Great White Father in Washington down the stairs and get rid of that burdensome middleman? Big Bro skims everything off the top. He always takes the cream and allows us to have the bottom of the milk jug.

Scott Obermuller

Since I last posted, I realized the lefty view of my post would be the stock answer that the govt sets up rules to favor the wealthy. Because the wealthy 'control' the govt. That we are offered only the 2 choices that the wealthy want us to presented with. The problem with this view is clear. What wealthy? The Koch bros are the current bete noire of the left, but clearly the Koch bros control nothing in any govt. Obviously the major parties want to present palatable candidates for the great unwashed. The 'great middle' is where the votes are and of course, a consortium of the usual grievance groups. Proper and prudent governance, especially as it applies to the economy, is lost with these voters. Basics such as wealth production and speculation are beyond the ken of almost all of them. Witness the post by K.E. above. He clearly has no clue how the world works. His answer is what most folks these days want - "mommy, make the bad people go away". The mechanics of govt control over how many times commodities are traded is nothing more than a scheme by the greediest of the greedy to make money at the public's expense. Notice that he admits the actions of Goldman Sachs are legal.
So change the rules and guess what? Goldman Sachs would just follow the new rules and get even richer. And the price of commodities would rise.
And we would have to pay for the monstrous new bureaucracy to support this nonsense. The rich get richer and the poor pay. And who wants this? The left. Poor working class folks in this country do subsidize the wealthy on a regular basis, but the poor must enjoy it as they regularly vote for the people that make the rules to make this so. Why should a multi-millionaire actor have to pay full freight for his latest car? He can always have the working poor help him via the left wing govt. If he wants solar panels on the roof of his horse stables he knows the poor rate payers are standing at the ready to pitch in.

Bill Tozer

"mommy, make the bad people go away". Best quote of the mouth.

the bad boogie men are hiding under your beds. I am scared. I can't sleep.

Bill Tozer

Concerning Mr. stevenfrisch's comment about QofL issues that cannot be measured by GDP/GNP here is one person's response that says it for me:

http://www.foxnews.com/opinion/2014/06/20/in-team-obama-world-us-workers-are-collateral-damage-to-green-agenda/

George Rebane

re BillT 557am - All 'collateral damage' caused by the govt gun on displaced workers, their families, and the economy is caused by their socialist central planners. There are no market forces involved such as might be brought about by the introduction of a new technology. It is such massive interference in what people would want to do on their own that has permanently put our new economy on the R3 'recovery' I describe above.

We must always remember that this regime's rule makers have a very jaundiced vision of how future America must live under an ever-growing Leviathan. And we are already divided by how we relate to Leviathan - those who feed the beast, and those who are fed by it. Only its loyal chorus will justify the status quo by citing the gray area that government also provides something for those from whom it takes.

Scott Obermuller

Good point, Bill. Growing up I remember that the coal miners were the poster children for the left. Suddenly they're 'good riddance to bad rubbish'. Declining numbers mean less union money and power. They're now disposable. Every time you hear a lefty (politician or otherwise) go into a heart clutching rant about some wretched group - it's only for the political gain and the moment.
Our nation is sitting on energy reserves that go to the moon. Are they limitless? No. But we can use them for hundreds of years and have clean air and full employment. And have the time to phase in new ways of powering our nation and the world that make economic sense in a free market economy. Note to leftys - economic sense means good for the masses, not just the politicians and wealthy libs.

Russ Steele

Obama's Plan to Save the World

Europe was mothballing natural gas and importing US coal even before the crisis in Ukraine. Think Europe is going to burn less coal now?

Such is the silliness of cap-and-trade, uneconomical government forays into wind and solar energy, and policies that consume energy (shipping US coal thousands of miles to China and Europe) so they can burn it there, because we cannot burn it here.

The notion Obama is going to save the world from greenhouse gasses and rising temperatures via US government policy to burn less coal and be more fuel efficient here is clearly absurd.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Read more at http://globaleconomicanalysis.blogspot.com/2014/06/analysis-of-obamas-plan-to-save-world.html#GgkuhrojGEv6vuSk.99

Bill Tozer

I am just waiting for the mean green energy machines to kick in high gear, employ hundreds of millions, cause a huge global stock market bubble, then crash. In the aftermath we can truly blame Climate Change. All it takes is patience and to not die in the waiting room.

Bill Tozer

Speaking of gaming the system, that darn middleman was warned not to do it, but it happened anyway. Every wonder why 74 cents of every welfare dollar goes to the middleman? Solve the middleman issue and we might be getting somewhere. And they call it direct payments. Now that is a misnomer if I ever heard one.

http://www.azcentral.com/story/news/arizona/investigations/2014/06/22/phoenix-va-officials-false-data/11232447/

Bill Tozer

Darn, I just hate it when I am right again. Gives me no pleasure to say I told ya so, lib hole ass wipes. Of course you will disparage this as Faux News not to be taken seriously, dismissed out of as hand yellow journalism, but I no longer care.

So, tell me once again about Quality of Life issues.

http://www.foxnews.com/us/2014/06/25/economy-in-freefall-1q-revision-shows-shrinkage-2/

This is too easy. Like shooting fish in a barrel, with an added apology to Mr. Fish.

Consumer spending stocks make up the only sector that is down for the year. Although Wall Street is a separate beast and frequently goes in the opposite direction of reality, who cares about consumer spending anyway since it is only 70% of the economy. Perhaps manufactures and retail and small businesses and large mega corporation might give a hoot, but what do we Nazis know anyway? Blame Climate Change for a rather harsh winter in Atlanta. Blame the yearly flooding going on now in Indiana. Whatever you do, don't blame the current Administration's economic policies. And never blame fiscal policy coming out of the Washington, or should I say lack of fiscal policy.

I have a grand idea. Why don't we borrow another trillion smackers and throw it against the wall. That will certainly raise the GDP a percent or maybe 1.5% for a few months. I have another grand idea. Lets throw a trillion dollars at the wall, fund bird shredders in the desert (but never around the consistent breeze out in Chesapeake Bay where the 1%ers can look at them)and call it...get this...why don't we call it The Stimulus or Recovery Act and move on to more important things like forcing Mr. Curtis and Dr. Rebane and Granny and Aunt Bea to buy insurance policies that include pediatric dental care and pre-natal care.

All is not lost. Mr. Nice Smooth Consistent Movement and his little Kling Ons can take advantage of their much needed mental health care with the finest of couseling. Always a silver lining.

fish

This is too easy. Like shooting fish in a barrel, with an added apology to Mr. Fish.

No problem Bill…I hate most of my slimy brethren…..fire away!

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