Hope and Fear – Part I: Year of Promise - Eric Janszen

[FrankL]

Re: Stable credit and money supply vs 12%/year

I urge some caution.

wouldn't the increase from 3 million in 1990 to just under 9 million disabled workers in 2013 imply that the total population has increased threefold to keep the disabled as percentage of the population flat? Since the percentage has even been declining, something must be wrong in this graph. Is it the left-hand scale?

[bart]

Re: Stable credit and money supply vs 12%/year

wouldn't the increase from 3 million in 1990 to just under 9 million disabled workers in 2013 imply that the total population has increased threefold to keep the disabled as percentage of the population flat? Since the percentage has even been declining, something must be wrong in this graph. Is it the left-hand scale?

OMG, send me back to 3rd grade math. I had the ratios backwards!! You're correct FrankL and thanks for picking up the huge goof on my part, I should have seen it long ago myself. :-( I offer sincere apologies to all for the screw up. The chart has been corrected.

It does of course change the conclusion and Ferguson etc. are correct. There is a substantial trend jump starting around 2008.

Not only that, but the longer term disability trend started to separate from the population trend in the mid 1980s, and even more so in the mid 1990s when the Fed cranked up the monetary base etc. in order to try and head off signs of a recession.

Picking 1995 as a somewhat arbitrary starting point, if the disability trend would have continued following the population trend then total people on disability today would be about 4.8 million instead of the current 8.8 million.
Assuming 2 of the 4 million difference are actually valid, which is likely quite generous, the understatement of the U3 unemployment rate due to just invalid disability payments is at least 1.3%.





Lastly and a bit more positive, there was a large downward change to average monthly disability payments starting in 2010-11 as the chart below shows.

[Chris Coles]

Re: Stable credit and money supply vs 12%/year

My own experience was someone I was working with fell over, (not to my mind in such a way as to completely disable him, indeed, he was still working), but he announced that as soon as his "disability" status was confirmed, he was going to cease working; and as such he did exactly that. What I believed happened here in the UK was doctors, seeing how difficult full time employment was becoming to find, started writing off people onto disability allowance as a way to help those most in need of a job; young families and the like.

There has been a massive operation going on for a great deal of time, to cover up the consequences of a lack of new job creation by every government agency creating new schemes. Ten years ago, here in the UK, they opened up a very large operation called Pension Credit, where they effectively pensioned off anyone over 60 years old. That way, they were no longer listed as unemployed.

What I had not realised was the US must have been doing the same thing.

[c1ue]

Re: Stable credit and money supply vs 12%/year

I could not possibly add any more detail but the fundamental cultural problem is we don't like command economies( more as rhetoric). However no one seems to realize that we don't have a functional financial system to activate what ever it is the government decides to leave to the private sector to activate.

A big part of the 'dislike' is a combination of ignorance and indoctrination.

Why is having some semblence of regulation, some common sense limits to predatory behaviors, considered 'socialist'?

There is a wide range between laissez faire capitalism and Soviet Union style Leninism. For that matter, even Leninism was never as restrictive as say, the North Korean economy.

Post Great Depression, the US may have achieved that happy medium: a smoothing out of the boom/bust cycle from before along with a rudimentary package of regulation.

Today, we have both too much regulation (for the little people) and too little regulation (for the corporations and 1%) - a veritable indulgence system of regulatory supervision, in other words, those with enough money can do whatever they want.

[Jay]

Re: Hope and Fear – Part I: Year of Promise - Eric Janszen

What credit giveth, debt deflation taketh away. Private sector debt will continue to decline until it reaches 2% to 4% of GDP then rise as
interest rates rise.



Public sector debt will continue to rise until it reaches 8% to 9% of GDP then decline as interest rates rise.

EJ, how does the US rollover it's large short term debt obligations when interest rates rise? Seem like rock meets hard place there to me.

[bart]

Re: Hope and Fear – Part I: Year of Promise - Eric Janszen

One answer is to consider who is the current largest owner of Treasuries now - the Fed.

[aaron]

Re: Stable credit and money supply vs 12%/year

I bet if you graphed the rate of obesity in the United States in would correlate nicely with the disability graph.

We also have had a 12 year long war (still ongoing).
We also have a lot more older folks because of the baby boom.

When disabled workers hit 65 (or whatever) and start to collect SS, do they no longer count as disabled benefit recipients?

Were disability laws changed at some point in the recent past?

[vinoveri]

Re: Hope and Fear – Part I: Year of Promise - Eric Janszen

One answer is to consider who is the current largest owner of Treasuries now - the Fed.

exactly.
the Fed can buy every bond issued; while such an circumstances may have been unthinkable only a few years ago, what has been going on tends to support this;
China sells, Fed buys, Jp sell, Fed buys, UK sells (not), Fed buys ..... might need to throw in a few capital controls to prevent $s from returning to US to fast, but no big deal to do that.

[bart]

Re: Stable credit and money supply vs 12%/year

I bet if you graphed the rate of obesity in the United States in would correlate nicely with the disability graph.

That would be phat... ;-)

We also have had a 12 year long war (still ongoing).
We also have a lot more older folks because of the baby boom.

Truth, and part of the reason for knocking off 50% of the change in trend.

When disabled workers hit 65 (or whatever) and start to collect SS, do they no longer count as disabled benefit recipients?

To the best of my knowledge, yes. The SS average monthly payment is slightly higher than the disability one too.

Were disability laws changed at some point in the recent past?

I don't know, it's not an area of expertise for me. But considering the drop in the average monthly payment starting in 2011, probably.

[lakedaemonian]

Re: Stable credit and money supply vs 12%/year

I bet if you graphed the rate of obesity in the United States in would correlate nicely with the disability graph.

What will also be interesting is if the US sees a parallel to Cuba post Soviet subsidies.

As I understand it, Cuban obesity rates, and cardio health problems crashed with income/quality of life/standard of living.

I wonder if we will see Peak Obesity?

Maybe there will be a positive in all the bad news.

[aaron]

Re: Stable credit and money supply vs 12%/year

doubtfully. Real food is unaffordable to the majority of citizens. The poorer the country gets, the more we will eat cheap, obesity-producing foods. Do not worry, the same oligarchs will sell you the drugs to keep you alive. It is a virtuous circle.

[shiny!]

Re: Stable credit and money supply vs 12%/year

doubtfully. Real food is unaffordable to the majority of citizens. The poorer the country gets, the more we will eat cheap, obesity-producing foods. Do not worry, the same oligarchs will sell you the drugs to keep you alive. It is a virtuous circle.

Just like Bayer selling carcinogenic pesticides, and the chemo to treat the cancer.

[FrankL]

Re: Stable credit and money supply vs 12%/year

Home made food made from scratch is quite cheap. Surely cheaper than ready-made food from the supermarket. It requires you to spend time and invest effort to learn to cook a decent meal though...

[BadJuju]

Re: Stable credit and money supply vs 12%/year

FrankL is right. You can always make good, real food that is cheaper than anything you can get that is pre-made or made with poor ingredients. The problem for most is that it requires a little more upfront effort. With practice and good recipes, it can also take less time, be much more filling, and more nutritional to do it yourself.

[Jay]

Re: Hope and Fear – Part I: Year of Promise - Eric Janszen

This implies that there is no real market for Treasuries, which is pretty obvious when you look at the continuing central control of the bond market for the last half decade or so, and also implies that if there is enough confidence in "the system" that the Fed can monetize most anything; i.e. the bond vigilantes are truly dead. If that is so, why would the Fed let rates rise in the first place? Why not use their almost unlimited powers to nip any market turmoil in the bud well before a 100 basis point rise hits the board? Especially in an output gap situation?

To me, if they truly have that power, which up to this point has been the case, and they might have it for a long while yet, they won't let rates rise beyond some marginal amount. If they do it could be kaplewy.

Yet, reading EJ's post, it looks like the Fed may let rates rise gradually or, the rise may be out of their their control but will be a gradual rise anyway. Either way, I'm having trouble seeing how a gradual rise could be in the cards with the economy on fumes. That just seems like the end of the game to me. And the rollover issues don't even get into derivative market risk that sits in the shadows behind this whole thing.

Unless, of course, there is real growth in the cards and Peak Cheap Oil ends up being a Malthusian proposition.