Unemployment by industry: Recession or depression? - Eric Janszen

[Nervous Drake]

Re: Unemployment by industry: Recession or depression?

.

[WDCRob]

Re: Unemployment by industry: Recession or depression?

If a thousand points of compassionately conservative light had been enough in and of themselves grandma wouldn't have been eating dogfood in the first place - and we'd have no Social Security. But, hmmm... look at the poverty rate among the elderly before and after.

If the fact that people don't really care to die from eating beef au rotten was enough to stop meat packing companies from killing people Sinclair Lewis wouldn't have had much to go on, and there'd be no FDA.

Coal mine safety? OSHA. Or maybe you support the unions? No, I didn't think so. And if you want to live in a society where hard-working people are faced with a choice between starvation and death by black lung, methane explosion or tunnel collapse, well what can I say? Move to China.

If governments can't solve problems why can you swim in the Cuyahoga River today without risk of third degree burns? Got EPA?

NASA? Government program last time I checked.

WWII? Oops, more big government. Oh, wait. Libertarians think government should do that one? Keep the peace, enforce the law, fight the wars?

Hmmm... sounds like Libertarians are people who expect the government to provide what they can't do for themselves. Just like everyone else.

[bpr]

Re: Unemployment by industry: Recession or depression?

If a thousand points of compassionately conservative light had been enough in and of themselves grandma wouldn't have been eating dogfood in the first place - and we'd have no Social Security. But, hmmm... look at the poverty rate among the elderly before and after.

If the fact that people don't really care to die from eating beef au rotten was enough to stop meat packing companies from killing people Sinclair Lewis wouldn't have had much to go on, and there'd be no FDA.

Coal mine safety? OSHA. Or maybe you support the unions? No, I didn't think so. And if you want to live in a society where hard-working people are faced with a choice between starvation and death by black lung, methane explosion or tunnel collapse, well what can I say? Move to China.

If governments can't solve problems why can you swim in the Cuyahoga River today without risk of third degree burns? Got EPA?

NASA? Government program last time I checked.

WWII? Oops, more big government. Oh, wait. Libertarians think government should do that one? Keep the peace, enforce the law, fight the wars?

Hmmm... sounds like Libertarians are people who expect the government to provide what they can't do for themselves. Just like everyone else.

Well put. I'm always amazed at politicians telling voters that the government shouldn't be involved or is incapable (Reagan's famous government is the problem line). What they're really saying is that they themselves shouldn't be involved and are incapable.

[Slimprofits]

Re: Unemployment by industry: Recession or depression? - Eric Janszen

From metalman's link:

The fact that more students than ever are attempting to get a college degree allows colleges to be aggressive in how they price their tuition.

Vinoveri: The whole educational establishment is effectively compulsory

Enrollment in higher education doubled from 7 million in 1970 to 14 million in 2002, while the total population of young people barely budged from 36 to 39 million.

There have been way too many (including myself at one point) undergrads in silly majors.

[Munger]

Re: Unemployment by industry: Recession or depression?

thanks. points taken. i don't have the answers, but think that more gov is not the answer. the housing bubble description above seems to leave out the role that the gov played in it (low interest, fannie, freddie). could we have had the bubble and the current repurcussions w/o the gov involvement?

If you are interested in learning about why you are wrong, familiarize yourself with the work of Joseph Stiglitz (the most cited economist alive ... behind only Von Mises or Ron Paul were internet forums counted as citations). Specifically.

[vinoveri]

Re: Unemployment by industry: Recession or depression?

If a thousand points of compassionately conservative light had been enough in and of themselves grandma wouldn't have been eating dogfood in the first place - and we'd have no Social Security. But, hmmm... look at the poverty rate among the elderly before and after.

If the fact that people don't really care to die from eating beef au rotten was enough to stop meat packing companies from killing people Sinclair Lewis wouldn't have had much to go on, and there'd be no FDA.

Coal mine safety? OSHA. Or maybe you support the unions? No, I didn't think so. And if you want to live in a society where hard-working people are faced with a choice between starvation and death by black lung, methane explosion or tunnel collapse, well what can I say? Move to China.

If governments can't solve problems why can you swim in the Cuyahoga River today without risk of third degree burns? Got EPA?

NASA? Government program last time I checked.

WWII? Oops, more big government. Oh, wait. Libertarians think government should do that one? Keep the peace, enforce the law, fight the wars?

Hmmm... sounds like Libertarians are people who expect the government to provide what they can't do for themselves. Just like everyone else.

Good soundbites, but a few historical and sentimental anecdotes aren't really convincing to me that we should allow the gov to do whatever it pleases in "our self interest". Never said the gov can't solve problems. It does have a tendency though to create more than it solves IMO and deprive the populace of its freedoms.

In the cases you cite, the pattern appears to be that wrongs are identified by the public, the public collectively empowers/demands the gov address the specific problem - the gov creates an agency - addresses the problem AND THEN, instead of closing down until the next public demand, looks (and of course always finds) for more "problems" to address in order to feed itself and maintain its power.

and NASA? maybe putting a man on the moon was a feat difficult to regret; and maybe the Hubble Telescope's been worth it; what else - is the conclusion that once a gov org accomplishes its mandate it should grow and seek out new things to do?

and grandmas are normally (historically anyways) taken care of by their children and grandchildren - oh, perhaps we don't want that responsibility - so let's pass it off on the rest of the country - and while we're at it let's pass on the responsiblity of raising our kids to the gov (oops -forgot, we don't need to have kids because the gov will take care of us in our old age instead of our kids); and hey let's go one more - let's have the gov take care of us - guarantee us a living.

Sounds good except for the part of, say loss of personal dignity/integrity, self-reliance, and living under the yokes of some bureocratic whims, transferring gov debt onto our children and grandchildren (oops -forgot we don't need children to take care of us anymore, well maybe we do need them so they can serve the master all protector gov).

[vinoveri]

Re: Unemployment by industry: Recession or depression?

If you are interested in learning about why you are wrong, familiarize yourself with the work of Joseph Stiglitz (the most cited economist alive ... behind only Von Mises or Ron Paul were internet forums counted as citations). Specifically.

wrong about what? that more gov is not the answer? I'd need some kool-aid to make such a seachange. thanks for the link though

[Munger]

Re: Unemployment by industry: Recession or depression?

wrong about what? that more gov is not the answer? I'd need some kool-aid to make such a seachange

Sorry: Why you are wrong that the market is more efficient without government and should be left to itself:

"Adam Smith, the father of modern economics, is often cited as arguing for the 'invisible hand' and free markets: firms, in the pursuit of profits, are led, as if by an invisible hand, to do what is best for the world. But unlike his followers, Adam Smith was aware of some of the limitations of free markets, and research since then has further clarified why free markets, by themselves, often do not lead to what is best. As I put it in my new book, Making Globalization Work, the reason that the invisible hand often seems invisible is that it is often not there.

Whenever there are 'externalities'—where the actions of an individual have impacts on others for which they do not pay or for which they are not compensated—markets will not work well. Some of the important instances have been long understood—environmental externalities. Markets, by themselves, will produce too much pollution. Markets, by themselves, will also produce too little basic research. (Remember, the government was responsible for financing most of the important scientific breakthroughs, including the internet and the first telegraph line, and most of the advances in bio-tech.)

But recent research has shown that these externalities are pervasive, whenever there is imperfect information or imperfect risk markets—that is always.

The real debate today is about finding the right balance between the market and government (and the third 'sector'—non-governmental non-profit organizations.) Both are needed. They can each complement each other. This balance will differ from time to time and place to place."

http://blogs.iht.com/tribtalk/busine...ization/?p=177

"The theories that I (and others) helped develop explained why unfettered markets often not only do not lead to social justice, but do not even produce efficient outcomes. Interestingly, there has been no intellectual challenge to the refutation of Adam Smith’s invisible hand: individuals and firms, in the pursuit of their self-interest, are not necessarily, or in general, led as if by an invisible hand, to economic efficiency. The only question that has been raised concerns the ability of government to remedy the deficiencies of the market.

Within academia, a significant fraction of economists are involved with developing and expanding on the ideas of imperfect information (and imperfect markets) that I explored. For instance, Edmund Phelps, this year’s Nobel Prize winner, belongs to this 'school' of thought. But in political discourse, simplistic 'market fundamentalism' continues to exert enormous influence."

http://www.beppegrillo.it/eng/2007/01/stiglitz.html

[SAM08]

Re: Unemployment by industry: Recession or depression? - Eric Janszen

"In total we see the US economy losing between seven and 13 million jobs by the end of 2009 representing a 5% to 10% increase in unemployment. Our forecasts during this crisis have tended to be on the optimistic side; steeper job losses cannot be ruled out, especially if other feedback loops intensify. For example, rising unemployment will lead to a further 20% to 40% decline in real estate prices as households lose access to income to pay mortgage debt. A further tightening of credit as the pool of credit-worthy borrowers contracts means even deeper losses in Wholesale Trade, leading to more unemployment, and so on".

EJ/Fred- If I connect the dots, the above in conjuntion with your Global Finance Disneyland piece tells me you believe that this will be an inflationary depression. Unless I'm misunderstaning and you have changed your view that the disinflation/deleveraging/unemployment pushes the reflation/poom out until 2010. It is challenging to see how the Fed can generate spending with unemployment running at 15%. Perhaps they will have no choice, but devaluing the dollar in the midst of rampant unemloyment sounds like a receipe for revolution. I can't imagine too many will be happy losing their jobs and then seeing half the money in their wallet evaporate overnight via debasement.

[dcarrigg]

Re: Unemployment by industry: Recession or depression?

I dont know. Why has tuition gone up 5x in a little over 20 years?
Is it salaries of staff? Infrastructure, falling state contributions, the football team??

Does anyone have a pie chart of costs in 85 vs. 2005??

The current 2008 expense breakdown estimated by the common fund institute is as follows:


[IMG]file:///Users/dcarrigg/Desktop/Picture%201.png[/IMG]Picture1.jpg




The greatest increases in higher education costs at public institutions have occurred when appropriations funding has decreased in a given fiscal year.



Picture 2.jpg




Overall, utility costs, fringe benefits for employees, materials and supplies, and upper-level administrator salaries have been the biggest drivers for increased costs at US Universities and Colleges:



Picture 1.png




Fundamentally, it seems that higher education prices have generally conformed to within +/-2% of CPI over 5-year average intervals since 1970. The HEPI has not been less than the CPI since 1993. The "skyrocketing" costs of higher education relative to inflation are likely due in large part to the redefinition of CPI by the BLS. See http://www.shadowstats.com/alternate_data



Picture 3.jpg




This being said, two-year colleges have kept prices significantly lower than their four-year counterparts, and it is probably very good advise to encourage students to spend two years at a two year school before transferring to a state university.



Picture 4.png

[EJ]

Re: Unemployment by industry: Recession or depression? - Eric Janszen

"In total we see the US economy losing between seven and 13 million jobs by the end of 2009 representing a 5% to 10% increase in unemployment. Our forecasts during this crisis have tended to be on the optimistic side; steeper job losses cannot be ruled out, especially if other feedback loops intensify. For example, rising unemployment will lead to a further 20% to 40% decline in real estate prices as households lose access to income to pay mortgage debt. A further tightening of credit as the pool of credit-worthy borrowers contracts means even deeper losses in Wholesale Trade, leading to more unemployment, and so on".

EJ/Fred- If I connect the dots, the above in conjuntion with your Global Finance Disneyland piece tells me you believe that this will be an inflationary depression. Unless I'm misunderstaning and you have changed your view that the disinflation/deleveraging/unemployment pushes the reflation/poom out until 2010. It is challenging to see how the Fed can generate spending with unemployment running at 15%. Perhaps they will have no choice, but devaluing the dollar in the midst of rampant unemloyment sounds like a receipe for revolution. I can't imagine too many will be happy losing their jobs and then seeing half the money in their wallet evaporate overnight via debasement.

Only the hard work, intelligence, creativity, saving, and investing of an economically free, well educated and ambitious people, relatively unhampered by taxes and regulation, and also of threats of theft and violence, can create purchasing power.

Unfortunately, our economy became too dependent on the purchasing power of credit. How dependent? Hard to say. Twenty percent? Forty? We shall only know in the course of time as all the credit disappears.

We will be left with many intelligent and well educated people willing and able to work, to apply their intelligence and creativity, but lacking savings and a financial system that enables investing. Economic freedoms will be threatened by the political reflex of over-regulation, and a well educated and willing people may lose their ambition, hampered by taxes and fees and the death by a thousand cuts that a government desperate for revenue can inflict on a people. Theft and violence are likely to increase in any case, as the high expectations that the purchasing power of credit created turn to disappointment and anger as the credit goes away, leaving debt in its wake.

The administration will be confronted with nothing but politically unacceptable choices. Each option is awful by degrees, every one of them. They can be broken down into three broad categories:

Option 1: Terrible

• High first year unemployment (10% - 15%)
• Median income provides access to necessities but living standards decline 10% to 20%
• Debts are paid off slowly out of inflated wages

Option 2: More Terrible

• Higher first year unemployment (15% - 20%)
• Median incomes provide access to necessities but living standards decline 20% to 40%
• Debts are extended by restructuring, sapping household cash flow without reducing total debt

Option 3: Horrific

• Very high first year unemployment (20% - 25%)
• Median incomes do not provide access to necessities. Living standards decline by 40% to 50%
• Debts are defaulted on

This is the logic behind our Ka-Poom Theory from 1999, that when the fallacy of the credit system was at last exposed by the course of events, when it could not be again resuscitated by fresh credit expansion, that governments walk down the list of ugly options and choose the one that create the least pain for itself, the lowest unemployment. That is not Option 3, a 1930s style deflation. That option is Option 1: a high inflation, higher than the 1970s, but not a hyperinflation.

The mechanism for that inflation, per Ka-Poom Theory, is the mountain of dollars that live overseas in official and private accounts. It will be beckoned home in stages, with the holders willing participants in devaluation of their own reserves.

[marvenger]

Re: Unemployment by industry: Recession or depression? - Eric Janszen

EJ I agree that option 1 looks the best, but the critical issue is being able to pay back debt through higher wage base. Is there analysis on iTulip of how the higher wage base is acheived. Its a big turn around in how the economic pie is divided up, it would also sap the will of those with capital you would think.

[audrey_girl]

Re: Unemployment by industry: Recession or depression? - Eric Janszen

very sobering article -

i work in hi-tech (silicon valley) and its layoff and hiring freeze time again.

Have friends at all the major players here

i fear it is going to get very bad; perhaps the worst i have ever seen

what is even more frightening is what you see if you are paying attention to some of the news that is not getting a lot of play, but that points to how very ugly it may get:

http://www.progressive.org/mag/wx100708.html

[lurker]

Re: Unemployment by industry: Recession or depression?

The "skyrocketing" costs of higher education relative to inflation are likely due in large part to the redefinition of CPI by the BLS.

Spot on. I think higher education and healthcare are two sectors where massive inflation in the money supply has not been offset by outsourcing to low wage economies.

In other words had the US consumer not benefitted from outsourcing to ultra low wage economies everything would have risen by the same amount as tuition and healthcare, and the "low inflation" lie would have been seen by the masses years ago.

[phirang]

Re: Unemployment by industry: Recession or depression?

Spot on. I think higher education and healthcare are two sectors where massive inflation in the money supply has not been offset by outsourcing to low wage economies.

In other words had the US consumer not benefitted from outsourcing to ultra low wage economies everything would have risen by the same amount as tuition and healthcare, and the "low inflation" lie would have been seen by the masses years ago.

so what happens to inflation when people stop paying top dollar for diploma mills and getting their fat sucked out?

i think by the time it becomes clear, the gold bugs will have committed hari kari!