Illusion of Recovery – Part I: Print and pray has officially failed - Eric Janszen

[Rantly McTirade]

Re: Illusion of Recovery – Part I: Print and pray has officially failed - Eric Janszen

As usual, an informative and enlightening article, Eric.
However, we absolutely DID NOT need Bernanke's machinations
since '08-and this observer is as 'serious' as any other.
We have too much bad debt so, very simply, we need...
'debt deflation/across the nation'. If this had been allowed-
with proper help to all those who suffered collateral(sic)
damage-we would have seen the Dow at 5000-or lower-
headline unemployment at 20%+(real world higher), etc.
We'd also be seeing a real, organic recovery at this point,
with the FIRE sectors permanently shrunken in stature.
We'd also see the vampires of the FIRE economy(Rubin,
Fuld, Paulson(H),Mozilo, Lewis and hundreds more) in,
to use the vernacular,'butt-slamming prison' and bank-
rupted to the point that their families would be living
under freeway overpasses, plus perhaps a few heart
warming scenes of vigilante retribution. Instead, we
have this massive debt overhang strangling the real
economy(and we don't need any residential or
retail/office commercial construction at all right now),
while the FIRE crowd continues to run our political-
and political economy-system. Bernanke, and of course
his predecessor, needs to swing in the yard in Leavenworth.

[dcarrigg]

Re: Illusion of Recovery – Part I: Print and pray has officially failed - Eric Janszen

Great post. Why is it so hard for some to just step back and look at the situation logically like you do? When it comes to economics, logic just seems to fly out the window. White becomes black and up becomes down if people think it will fufill their preconcieved political notions. Some start out with a philosophy, then spend the rest of their lives trying to prove it. Instead they should let the facts lead them to the truth.

I think the root of the problem is that causation is hard to prove and the results of changes to a complex system are hard to predict.

See, you say the facts lead you to truth.

But I cannot see the obvious logic in arguing that if the .gov ran 1/10 the budget over the last 50 years then the economy would be better (since I believe that this was the argument SalandRichard was making).

There is no objective way to prove that conjecture. The world would be different in myriad and unpredictable ways. This is why playing "what-ifs" on this scale is somewhat an exercise in futility (although it may make for a good Harry Turtledove book).

I agree that one must always be open to being proven wrong empirically. One should also always remain skeptical of ones own beliefs.

A quick paragraph in a forum is not enough to shake the foundations of anyone's beliefs, however, particularly when it is accompanied by no figures or sources.

[bart]

Re: Illusion of Recovery – Part I: Print, spend, and wait has officially failed - Eric Janszen

My understanding is that a wage-price spiral is helpful for discharging debt because the nominal wages of individual workers rise, providing them with the cash to pay down their debt, and generating nominal tax income for the government. In contrast, cost-push inflation from commodities and imports is unlikely to help much by itself, because that mostly translates into income for producers of commodities and imports. From what I understand, labor had a lot more pricing power in the 70's and 80's, so it was able to secure nominal wage increases to help offset inflation. That isn't going to be the case this time around, so possibly high cost-push inflation won't help as much with the debt.

Yep.

[shiny!]

Re: Illusion of Recovery – Part I: Print, spend, and wait has officially failed - Eric Janszen

Yep.

Bart, could you please explain what this chart means?

[Slimprofits]

Re: Illusion of Recovery – Part I: Print, spend, and wait has officially failed - Eric Janszen

The dwindling jobs growth situation - non farm payrolls

http://www.bls.gov/schedule/archives/empsit_nr.htm#2011

March 2011 revised to +194K
April 2011 revised to +217k
May 2011 revised to +53k
June 2011 revised to +20k
July 2011 revised to +85k
July to August change = 0

[gwynedd1]

Re: Illusion of Recovery – Part I: Print, spend, and wait has officially failed - Eric Janszen

The solution was a tax holiday and deficits to keep money circulating to replace the private credit that is in a perpetual stall. Instead they kept with the banker tax cut with low interest rates. They should raise interest rates to keep the dollar strong while the goods and service economy is compensated with low taxes. This however would leave the FIRE economy out of it, and we can't have that..... FIRE is wringing us out by the drop, and it does not matter to them we are missing it by the buckets everywhere else. Other than that, good ROI public spending is also a great idea.

[bart]

Re: Illusion of Recovery – Part I: Print, spend, and wait has officially failed - Eric Janszen

Bart, could you please explain what this chart means?

Labor share is the portion of output that employers spend on labor costs (wages, salaries, benefits, etc.) in their prices. Nonlabor share—the remaining portion of output—includes returns to capital, such as profits, net interest, depreciation, and indirect taxes.

When labor share is constant or rising, workers benefit from economic growth. When labor share falls, the compensation–productivity gap widens.




I just updated the chart itself too.

[shiny!]

Re: Illusion of Recovery – Part I: Print, spend, and wait has officially failed - Eric Janszen

Labor share is the portion of output that employers spend on labor costs (wages, salaries, benefits, etc.) in their prices. Nonlabor share—the remaining portion of output—includes returns to capital, such as profits, net interest, depreciation, and indirect taxes.

When labor share is constant or rising, workers benefit from economic growth. When labor share falls, the compensation–productivity gap widens.




I just updated the chart itself too.

Thanks for this!

[Chris Coles]

Re: Illusion of Recovery – Part I: Print, spend, and wait has officially failed - Eric Janszen

I just updated the chart itself too.

Quick question; does the chart include the decrease of the value of the $US over the time period?

[bart]

Re: Illusion of Recovery – Part I: Print, spend, and wait has officially failed - Eric Janszen

Quick question; does the chart include the decrease of the value of the $US over the time period?

Nope, not adjusted for inflation either.

[lektrode]

Re: Illusion of Recovery – Part I: Print and pray has officially failed - Eric Janszen

+100
NOW we're talkin!
couldnt've said it better myself....

As usual, an informative and enlightening article, Eric.
However, we absolutely DID NOT need Bernanke's machinations
since '08-and this observer is as 'serious' as any other.
We have too much bad debt so, very simply, we need...
'debt deflation/across the nation'. If this had been allowed-
with proper help to all those who suffered collateral(sic)
damage-we would have seen the Dow at 5000-or lower-
headline unemployment at 20%+(real world higher), etc.
We'd also be seeing a real, organic recovery at this point,
with the FIRE sectors permanently shrunken in stature.
We'd also see the vampires of the FIRE economy(Rubin,
Fuld, Paulson(H),Mozilo, Lewis and hundreds more) in,
to use the vernacular,'butt-slamming prison' and bank-
rupted to the point that their families would be living
under freeway overpasses, plus perhaps a few heart
warming scenes of vigilante retribution. Instead, we
have this massive debt overhang strangling the real
economy(and we don't need any residential or
retail/office commercial construction at all right now),
while the FIRE crowd continues to run our political-
and political economy-system. Bernanke, and of course
his predecessor, needs to swing in the yard in Leavenworth.

[lektrode]

Re: Illusion of Recovery – Part I: Print and pray has officially failed - Eric Janszen

1: close ALL the .mil bases on foreign soil (cept those securing vital/strategic traderoutes/resources) and BRING OUR TROOPS HOME
2: nobody gets laid-off - any of them who wants to work gets re-deployed to REBUILD ***OUR*** INFRASTUCTURE
3: 1st project: fix the roads and bridges, build-out a high-speed rail network
4: 2nd project: immed and _massive_ build-out of appx 500 nuclear power stations, as fast as they can krankem out
5: tell the arabs: we have a 'new deal' for you: we will trade 1barrel for 1bushel of corn/wheat whatevahs - or?
you can EAT YOUR OIL
6: levy the FICA tax on _all_ income, every last dollar, from every source, until the socsec acct balances

adding: 7: this (#6) would allow the .gov, aka WE The People to rebuild a capital base, so that WE DONT HAVE TO PAY INTEREST to the 'federal' reserve/oligarchs to finance projects that keep the rest of us employed.

there - does that leave any oxen 'ungored' ?
because we need _all_ the oxes gored.

The transfer payments to the poor, many of them armed veterans, is the "bread" part of the circuses. Seriously, do you want 50 million angry, hungry people rising up against the evil __________ who have held them down all these years? The alternative to transfer payments is civil war.

The fact is, if you really want to take a step back and look at the big picture... we can produce all our country needs now (using oil) with a very small portion of the population actually working. What do you want to do with all the "surplus labor"?

With the organization a functioning government provides, we can at least take the extra labor and build stuff that the rest of us can use and enjoy. Skilled labor may never be this cheap again in the U.S. Interest rates will also never be this low again. If there was ever a time to borrow 10 trillion and make the country a better place to live, now is the time. We even still have oil to burn for the job.

Of course, that is only a short term step. Long term, I think we should focus on decreasing population size in the United States and most problems will work themselves out. I think this can be accomplished by increasing inflation (check) and strict immigration policies. The job problem will work itself out as well with less people and more work (less oil) in the future.

But make no mistake, transfer payments to the poor make the United States a tolerable, dare I say "nice" place to live.

[metalman]

Re: Illusion of Recovery – Part I: Print and pray has officially failed - Eric Janszen

1: close ALL the .mil bases on foreign soil (cept those securing vital/strategic traderoutes/resources) and BRING OUR TROOPS HOME
2: nobody gets laid-off - any of them who wants to work gets re-deployed to REBUILD ***OUR*** INFRASTUCTURE
3: 1st project: fix the roads and bridges, build-out a high-speed rail network
4: 2nd project: immed and _massive_ build-out of appx 500 nuclear power stations, as fast as they can krankem out
5: tell the arabs: we have a 'new deal' for you: we will trade 1barrel for 1bushel of corn/wheat whatevahs - or?
you can EAT YOUR OIL
6: levy the FICA tax on _all_ income, every last dollar, from every source, until the socsec acct balances

adding: 7: this (#6) would allow the .gov, aka WE The People to rebuild a capital base, so that WE DONT HAVE TO PAY INTEREST to the 'federal' reserve/oligarchs to finance projects that keep the rest of us employed.

there - does that leave any oxen 'ungored' ?
because we need _all_ the oxes gored.

[lektrode]

Re: Illusion of Recovery – Part I: Print, spend, and wait has officially failed - Eric Janszen

whooo... dc!
thats one of yer best eye've seen to date! (as they say out here: get all chikin-skin, la'dat = goosebumps)

and while i think salnrich makes very good sense with a number of his points, it's quite evident that The US could not have accomplished whats been done without the collective resources represented by the 'commonwealth' of the states acting as a whole

the problem however, IMHO - (que stuck/broken record) is that the political aristocracy, bought-off by entrenched financial interests, et al - has sold We The People down the river to buy the votes of genl'y the most-vocal minority/fringe vs the majority of The Rest of Us...
whether its the FIRE brigade, corporate welfare, or simply entitlements supporting welfare-babies, as they seem to be mushrooming all over the place (even in NH ;) or gov unions (why? when they have civil service rules/protections against political turnover or retribution) and all else that causes/feeds the out-of-control buracracy (forgive my lazy spelling) that groweth exponentially...

i may not have my thoughts as clearly laid out as you guys (and wish i could type even 1/2 as fast vs halfassed) - but you get my drift

and i'm with you 100% on this: I will fight the nobility as our forefathers did.
for they are intent on re-creating here in the new world all that was abandoned in the old.

We need to just agree that some pieces of public infrastructure were/are good for a country. Next someone will argue that we should privatize the air force or something. It's absurd.

One cannot speak in hypotheticals about what would be if governments never existed or did anything. It might be a paradise in the mind's eye, but the 'what-if' idealism of a libertarian (or anyone else for that matter) is not grounded in reality. Nobody can know what would happen would there have been no Panama Canal built by the .gov or no interstate system etc.

I'll not buy the argument that the private sector would somehow make a better Panama Canal. If left to "market forces" it would never get built. Businesses who saw the advantage in more expedient shipping were thrilled that the nation built it, I guarantee. There are also geopolitically strategic reasons for needing that canal.

That's why the military got the job done. The army corps always has done these bigger jobs. Companies like Elliott Dredges certainly worked to complete the project, but on government contracts. This is okay. It is not the end of the world or a terrible distortion of a perfect market. University of Chicago microeconomics is not the answer to all of the woes of the world.

When has a private company ever taken on a large, somewhat risky project without government leading the way? Libertarian tendencies lead toward the explanation that the whole reason entrepreneurs should get oodles of cash is that they take risk. Yet one has to see how risk-adverse the private sector really is. This is also okay. Governments exist as the defenders, insurers and everything-else of last-resort. It can partner with the private sector to get things done. They can actually even work together towards a common goal (believe it or not). There is no dichotomy between private and public sector survival. One does not benefit as the other dies. I promise. Efficient government, sensible government, etc. are things one can argue for. Arguing that it should be done away with entirely is foolish and absurd.

Let me put it this way: when the $#!t hits the fan, will citizens want the U.S. Army or a Chicago School economist and a talking head from the Cato institute backing them up? Does anyone think that the average private weapons cache would even be enough to stop a single old surplus T-44? Thought games to prove how absurd it is to argue to privatize everything are easy to play.

As to your specific points, Sal&Richard:

#1: The panama canal was never a private project. The project, began by the French after the Suez Canal success, was taken over by TR's signing of the Hay–Bunau-Varilla Treaty. It may have been questionable whether Panamanians ever consented after they declared independence, but it was no private company that did this.

#2: Without the interstate system we would surely expend less energy today. We would also be a lot more urban and communiarian (as urban dwellers generally are on average). Moreover, trillions in GDP would be lost. But yes, things would probably be a whole lot more 'sustainable' as the progressives see it. Who knows what would happen in that world. Ask Russia, they never got a proper one built...it would probably look a lot like that, only with far more people.

#3: Sure, the dam probably wouldn't be built today unless it had major public political support over environmental concerns. This is likely an issue that will have to be dealt with as we move forward. I personally support the production of pebble bed reactors which suffer the same fate. At some point we need to go with what works and not what is politically expedient. But it was built when both the power and the work were needed. It could be done again today.

#4: Now you get into "wealth-envy." I'm sick of this argument. It literally sickens me. Whenever one stands up for not the poor (food stamps; welfare etc.) and not the rich (bailouts of banks/insurance cos./reductions on estate tax etc) one is made out to be "envious of wealth." What if one is not envious of wealth but rather valuing of work?

#5: What if I don't personally want billions? What if I want the middle class to be able to make twice what they do if they work hard, earn it, and don't inherit a trust fund? Am I a communist? I don't think so. Take the concept of wealth envy somewhere else. One may find sympathy for it in the house of lords. I'll not honor it on this side of the pond. What if it's my personal belief that a soldier is worth 10 tax-dodging bankers and should be paid accordingly? This I see as the grand battle facing us as middle class citizens in America.

There are many talking heads that believe it's okay to 1) get rich by managing a corporation to the brink of bankruptcy, 2) destroy 80% of all shareholder value, and 3) rob people with misleading and fraudulent products. They argue that the "talent" is worth the investment. Then they say that the public must bail them out (and they donate to make sure the politicians hand out the public money). Then they say the money they made shouldn't be taxed because they 'worked hard'. Then they argue that their children should be rich in perpetuity from generation to generation so we must lower the estate tax. Their children then never work a day in their lives and continue to fight for lower taxes on their trust funds. It's a sad joke.

Calling it wealth envy is akin to saying that an anti-cannibalist has flesh envy. It's a broken system and a bad idea. Many among the richest in the US have been saying the same thing. But the talking heads say, "what do billionaires know about what's good for them?" It's a sad, sad joke.

I will fight the nobility as our forefathers did. There will even be allies among the billionaire class that fight the nobility. They will not win.

[dcarrigg]

Re: Illusion of Recovery – Part I: Print and pray has officially failed - Eric Janszen

1: close ALL the .mil bases on foreign soil (cept those securing vital/strategic traderoutes/resources) and BRING OUR TROOPS HOME
2: nobody gets laid-off - any of them who wants to work gets re-deployed to REBUILD ***OUR*** INFRASTUCTURE
3: 1st project: fix the roads and bridges, build-out a high-speed rail network
4: 2nd project: immed and _massive_ build-out of appx 500 nuclear power stations, as fast as they can krankem out
5: tell the arabs: we have a 'new deal' for you: we will trade 1barrel for 1bushel of corn/wheat whatevahs - or?
you can EAT YOUR OIL
6: levy the FICA tax on _all_ income, every last dollar, from every source, until the socsec acct balances

adding: 7: this (#6) would allow the .gov, aka WE The People to rebuild a capital base, so that WE DONT HAVE TO PAY INTEREST to the 'federal' reserve/oligarchs to finance projects that keep the rest of us employed.

there - does that leave any oxen 'ungored' ?
because we need _all_ the oxes gored.

Bravo. Pick any two from that list to implement and we'd be far better off.