New Jobless #s .. yikes. Inflation?

[tsetsefly]

Re: New Jobless #s .. yikes. Inflation?

The logical outcome of this whole crisis should be that the Walmart heirs lose in their attempt to gut Estate taxes, and we go back to the late 50's in terms of income tax rate structure (adjusted for inflation) and have a massive works program. That may begin to set things back on track.

However, I do believe that over the last 30 years, greed has always trumped logic in American politics -- starting with the oft quoted "Mantra" - "Greed is Good."

I dont know how working programs would do anything... they did nothing in the 1930's...

Greed has always trumpeted politics, everywhere... that is why politicians always want more power...

[Rajiv]

Re: New Jobless #s .. yikes. Inflation?

The standard of living has doubled for those that have a job perhaps.

1953 onward


Nothing like what has happened here in the US. I am assuming that the Japanese rate is like the U-3. If it is like the U-6, then the jobless rate is much lower.

From - Japan Statistical Bureau - Q&A Concerning Labour Force Survey in General

According to the Labour Force Survey "Detailed Tabulation"(2009 Yearly Average), persons not in labour force are 44.22 million, of which, those with "Wishing to work" are 4.71 million. Of which, persons with "No prospect of finding a job " are 1.63 million, of which, those with "Can take up job immediately if a job is available" are 670,000, and of which "Sought a job during the past one year" are 420,000.

[tsetsefly]

Re: New Jobless #s .. yikes. Inflation?

Inflation Fallacy #1: When unemployment rises, inflation falls

We’ve locked horns for years with analysts who can’t imagine how inflation can rise when jobs are scarce. Where is the competition for goods going to come from to drive up prices if consumers are cutting back on their spending to conserve savings, either because they are unemployed or are afraid they will be soon? That is certainly the environment that we see ourselves in today.

This sounds reasonable until you consider the case of India today where both unemployment and inflation are rising together.

How is rising inflation and rising unemployment possible? Because inflation is not only a factor of the supply and demand for goods but also of the supply and demand for the money used to buy the goods. Demand is determined not only by the level of desire of consumers to purchase goods but also their means to do so, the purchasing power of their income and savings. This leads us to the second fallacy of inflation. Also, producers may cut goods supply even more quickly than consumers reduce demand, resulting in a goods supply/demand imbalance albeit at a lower level than before the recession.

Inflation is a process, not an event - Part I: Three inflation fallacies - Eric Janszen

I cant believe this is still up for discussion there are countless examples of inflation and unemployment rising... if im not mistaken it also happened in period during the great depression...

[Rajiv]

Re: New Jobless #s .. yikes. Inflation?

I dont know how working programs would do anything... they did nothing in the 1930's..

Not true see Dave Stratman's comment here

"Most people believe the economy crashed between 1929 and 1932 and then remained depressed until the Second World War, which finally mobilized the economy’s idle resources and brought about a full recovery. That’s complete bunk if you calculate the unemployment data correctly (see here for an explanation) . Even leaving aside the unemployment calculations, it is abundantly clear that, once the Great Depression hit bottom in early 1933, the US economy embarked on four years of expansion that constituted the biggest cyclical boom in U.S. economic history. For four years, real GDP grew at a 12% rate and nominal GDP grew at a 14% rate. There was another shorter and shallower depression in 1937 largely caused by renewed fiscal tightening (and higher Federal Reserve margin requirements). This second depression has led to the misconception that the central bank was pushing on a string throughout all of the 1930s, until the giant fiscal stimulus of the wartime effort finally brought the economy out of depression." (Auerback: The Real Reason Banks Aren’t Lending By Marshall Auerback)

Auerback doesn't explain why the Roosevelt administration engaged in fiscal tightening to bring about that second depression in 1937. I suspect fiscal tightening was the administration's response to the strike wave sparked by the Flint Sit-Down Strike (Dec. 30, 1936-Feb. 11, 1937), "the strike that was heard round the world." The second depression was the rulers' attempt to re-instill fear in a working class that was getting too sure of itself.

Why is Auerback's point so important? The myth that only World War II brought us out of the Great Depression encourages the belief that there really is nothing governments can do--short of catastrophic wars--to restore a viable economy. In fact the Roosevelt Administration had the policy tools at its fingertips to end the Depression and dramatically cut the unemployment rate, and it did so successfully for four years, from 1933-37.

[blazespinnaker]

Re: New Jobless #s .. yikes. Inflation?

Yeah, but what's the bond rate in India?? Somehow I doubt the bond vigilantes are buying 30 year indian bonds at 3%. I believe in the bond vigilantes. Basically smart money retired folk invest in these people and at the slightest whiff of weakness they'd jump on these guys like rats from a burning ship.

Bill Gross did not get to where he is by being some kind of political guy, but rather by delivering consistent results year after year after year. He writes reports and real people with real money read those reports and on the basis of his cognition decide to trust their money to him. Bill Gross is not a fool - he delivers low risk yield.

I'm sorry, but the long bond is dropping hard. Maybe it's a bubble, maybe it isn't. I just wish there was less religion here and more analysis.

[FRED]

Re: New Jobless #s .. yikes. Inflation?

I cant believe this is still up for discussion there are countless examples of inflation and unemployment rising... if im not mistaken it also happened in period during the great depression...

Old habits die hard.

[dummass]

Re: New Jobless #s .. yikes. Inflation?

Old habits die hard.

FRED

Idea for next/future article: Are bonds in a bubble?

[Chomsky]

Re: New Jobless #s .. yikes. Inflation?

FRED

Idea for next/future article: Are bonds in a bubble?

That has been answered before:

No such thing as a Treasury bond bubble - Eric Janszen

[dummass]

Re: New Jobless #s .. yikes. Inflation?

That has been answered before:

No such thing as a Treasury bond bubble - Eric Janszen

Thank you, Chomsky. I hadn't seen that one.

Much has changed since EJ wrote that piece, a year-and-a-half ago. Much of what he predicted has already come to pass. If we are at the end of the first cycle (or second bounce), what's next? Should we expect a repeat?

We should note that EJ's opinion, at the time, was also influenced by his belief that the FIRE economy was dead; as a result, he wasn't predicting any new bubbles. Well... the ship didn't sink; the government bailed it out; and investors have abandoned the life boats for the perceived safety of the ship, again. I sense a sea change. Maybe it's time for an update.

[c1ue]

Re: New Jobless #s .. yikes. Inflation?

Bill Gross did not get to where he is by being some kind of political guy, but rather by delivering consistent results year after year after year.

According to your criterion, Jamie Dimon is also a brilliant analyst then. He also has delivered consistent results year after year.

Of course every other example in history of consistent results year after year has later been shown to be either outright accounting fraud or manipulation of accounting (Enron, Worldcom, Dell, Cisco, etc etc), but by all means continue to think that consistent results is purely due to intelligence.

[tsetsefly]

Re: New Jobless #s .. yikes. Inflation?

Not true see Dave Stratman's comment here

Originally Posted by Dave Stratman "Most people believe the economy crashed between 1929 and 1932 and then remained depressed until the Second World War, which finally mobilized the economy’s idle resources and brought about a full recovery. That’s complete bunk if you calculate the unemployment data correctly (see here for an explanation) . Even leaving aside the unemployment calculations, it is abundantly clear that, once the Great Depression hit bottom in early 1933, the US economy embarked on four years of expansion that constituted the biggest cyclical boom in U.S. economic history. For four years, real GDP grew at a 12% rate and nominal GDP grew at a 14% rate. There was another shorter and shallower depression in 1937 largely caused by renewed fiscal tightening (and higher Federal Reserve margin requirements). This second depression has led to the misconception that the central bank was pushing on a string throughout all of the 1930s, until the giant fiscal stimulus of the wartime effort finally brought the economy out of depression." (Auerback: The Real Reason Banks Aren’t Lending By Marshall Auerback)

Auerback doesn't explain why the Roosevelt administration engaged in fiscal tightening to bring about that second depression in 1937. I suspect fiscal tightening was the administration's response to the strike wave sparked by the Flint Sit-Down Strike (Dec. 30, 1936-Feb. 11, 1937), "the strike that was heard round the world." The second depression was the rulers' attempt to re-instill fear in a working class that was getting too sure of itself.

Why is Auerback's point so important? The myth that only World War II brought us out of the Great Depression encourages the belief that there really is nothing governments can do--short of catastrophic wars--to restore a viable economy. In fact the Roosevelt Administration had the policy tools at its fingertips to end the Depression and dramatically cut the unemployment rate, and it did so successfully for four years, from 1933-37.

Interesting that they fail to mention inflation. And using GDP growth as a way to measure a recovery is the same thing they have done these past 9 years and many here criticize them for. Unemployment remained high for years and it wasn't till many of FDR's programs where ruled unconstitutional and WWII that things got better.
Where exactly will the money come from for job programs?

[flintlock]

Re: New Jobless #s .. yikes. Inflation?

Reality check. Ask anyone who was actually alive 1933-1937 if they remember those being boom times in the USA. Statistics don't always tell the true story.

[ViC78]

Re: New Jobless #s .. yikes. Inflation?

Bill Gross did not get to where he is by being some kind of political guy, but rather by delivering consistent results year after year after year. He writes reports and real people with real money read those reports and on the basis of his cognition decide to trust their money to him. Bill Gross is not a fool - he delivers low risk yield.

Isn't Bill Gross begging the government to take over the housing market and save his MBS portfolio? That sounds quite political to me.

[Rajiv]

Re: New Jobless #s .. yikes. Inflation?

Interesting that they fail to mention inflation. And using GDP growth as a way to measure a recovery is the same thing they have done these past 9 years and many here criticize them for. Unemployment remained high for years and it wasn't till many of FDR's programs where ruled unconstitutional and WWII that things got better.
Where exactly will the money come from for job programs?

If you had clicked on the link where unemployment was mentioned by Stratman, you would have found

Ritholtz quotes Marshall Auerbach -

Historical revisionists have done much to dismiss the economic achievements of the New Deal, some even going so far as to suggest that FDR’s fiscal policies worsened the crisis. Such arguments have been made popular during the past 25 years by economists and historians keen to debunk the effectiveness of Keynesian economics in favor of the neo-liberal Washington Consensus. We suggest, on the contrary, that mainstream economics and policy have been unable to come to grips with our current socio-economic problems because of a lack of historical memory.

In particular, the key to evaluating Roosevelt’s performance in combating the Depression is the statistical treatment of many millions of unemployed engaged in his massive workfare programs. Including such ‘workfare’ recipients as employed presents a radically different picture for the New Deal, showing unemployment dropping by almost two-thirds from a high of 25%. Treating these men and women as unemployed while soldiers in Germany and France were treated as having jobs has made the Roosevelt administration’s economic performance appear uncompetitive, but it is fairer to argue that the people employed in government public works and conservation programs were just as authentically (and much more usefully) employed as draftees in what became garrison states. Meanwhile Roosevelt was rebuilding America at a historic bargain cost.

Ritholtz goes on to say

In 1933, there was great disagreement about how to deal with an economic recession or depression, and Roosevelt’s administration, and he himself, had conflicting impulses. Herbert Hoover, in conjunction with the Federal Reserve and his “liquidationist” Treasury Secretary, Andrew Mellon, had made the worst possible selection of policy options: higher taxes and tariffs and a shrunken money supply. The unemployment rate was 25 per cent, about four times what it is now, and there was no direct relief for the unemployed.
On Inauguration Day, 1933 (then March 4), there were machine-gun nests at the corners of the great government buildings in Washington, for the only time since the Civil War. All banks in 32 states had been closed sine die. Six other states had closed almost all their banks. In the other 10 states and D.C., withdrawals were limited to 5 per cent of deposits, and in Texas to $10 a day. The New York Stock Exchange and Chicago commodity exchanges had also been closed indefinitely. The financial system had effectively collapsed, and was threatening to take the life savings of millions of people and what was left of the world’s financial system with it. Revolution beckoned.
In a fever of activity, Roosevelt guaranteed bank deposits, made the federal government a temporary non-voting preferred shareholder in thousands of suddenly under-capitalized banks – more than half the banks in the country – refinanced millions of residential and farm mortgages, tolerated cartels and collective bargaining to raise prices and wages, increased the money supply, effectively departed the gold standard, repealed Prohibition of alcoholic beverages (wrenching one of America’s largest industries out of the hands of the underworld), and legislated reduced working hours and improved working conditions for the whole work force. In the next two years, in what became known as the Second New Deal, he set up the Securities and Exchange Commission, created the Social Security system, and broadened the powers of the Federal Reserve to equal those of other national central banks. The Hoover agricultural policy had been to dump surpluses abroad, lend foreign governments the money to buy them, and then pursue them aggressively when the debtor countries defaulted. Roosevelt had farmers vote, by category of what they produced, on agreed production cutbacks, assuring sustainable agricultural prices, and compensated farmers for the production they had curtailed.
The key to evaluating Roosevelt’s performance in combating the Depression is the statistical treatment of many millions of unemployed engaged in his massive workfare programs. The government hired about 60 per cent of the unemployed in public works and conservation projects that planted a billion trees, saved the whooping crane, modernized rural America, and built such diverse projects as the Cathedral of Learning in Pittsburgh, the Montana state capitol, much of the Chicago lakefront, New York’s Lincoln Tunnel and Triborough Bridge complex, the Tennessee Valley Authority and the aircraft carriers Enterprise and Yorktown.
It also built or renovated 2,500 hospitals, 45,000 schools, 13,000 parks and playgrounds, 7,800 bridges, 700,000 miles of roads, and a thousand airfields. And it employed 50,000 teachers, rebuilt the country’s entire rural school system, and hired 3,000 writers, musicians, sculptors and painters, including Willem de Kooning and Jackson Pollock.
Even pro-Roosevelt historians such as William Leuchtenburg and Doris Kearns Goodwin have meekly accepted that the millions of people in the New Deal workfare programs were unemployed, while comparable millions of Germans and Japanese, and eventually French and British, who were dragooned into the armed forces and defense production industries in the mid-and late 1930s, were considered to be employed.
This made the Roosevelt administration’s economic performance appear uncompetitive, but it is fairer to argue that the people employed in government public works and conservation programs were just as authentically (and much more usefully) employed as draftees in what became garrison states, while Roosevelt was rebuilding America at a historic bargain cost.
If these workfare Americans are considered to be unemployed, the Roosevelt administration reduced unemployment from 25 per cent in 1933 to 9 per cent in 1936, up to 13 per cent in 1938 (due largely to a reversal of the fiscal activism which had characterized FDR’s first term in office), back to less than 10 per cent at the end of 1940, to less than 1 per cent a year later when the U.S. was plunged into the Second World War at the end of 1941. The reasons for the discrepancies in the unemployment data that have historically arisen out of the New Deal are that the current sampling method of estimation for unemployment by the BLS was not developed until 1940, thus unemployment rates prior to this time have to be estimated and this leads to some judgment calls.

The whole Rithotz article is worth reading.

[tsetsefly]

Re: New Jobless #s .. yikes. Inflation?

If you had clicked on the link where unemployment was mentioned by Stratman, you would have found



The whole Rithotz article is worth reading.

I had read that and found no answers for my questions.

I also cringed when I read "the effectiveness of Keynesian economics"... yikes.

The main argument of those "revisionist" is that roosvelts policies only prolonged the great depression and that is true.

And that is not even mentioning how authoritarian he was and how fascistesq his policies were. But then again, he was a great admirer of Mussolini's "great experiment", until WWII of course(in fact he loved it so much he sent two of his top advisers to take a look at how "great"things were run in Italy... The abuse of civil liberties during the roosvelt administration compete with the bush administration's record on civil liberties, like the Blue eagle preference treatment. Or another of my favorite roosvelt moves was to put minimum prices for products at a time where people could not afford to buy much, or how about the grain dumpings that took place? As I said there was a reason the NRA and roosvelts policies where batted down to the court.

Oh and lets not forget that Social security was started during this time, if there was ever a ponzi scheme... At least madoff made you think you were making money, Social Security makes no pretense...

Finally, to add to my roosvelt rant. If there was anyone who favored big business over the people/small businesses etc. it was roosvelt. He could only dream of the Big Business/government partnership we would come to have... i guess he was a man ahead of his time...